The Franchise Group files for Chapter 11 with a pre-arranged debt-for equity restructuring plan and $250 million in DIP financing.
The company pre-arranged a debt-for-equity restructuring plan involving approximately 80 percent of its first lien debt lenders. Under that plan, which is subject to court approval, the first lien lender group would come out with 100 percent of the equity. Already the lenders have committed $250 million in debtor-in-possession financing so the company can continue to operate.
The Franchise Group has suffered under a heavy debt load with poor-performing stores, inflation, rising interest rates and a federal investigation into the financial dealings of its former chief executive officer, Brian Kahn, which triggered concerns among lenders. Across the U.S., The Franchise Group has 2,200 stores, including mostly corporate-owned and some franchised locations, and approximately 11,900 total employees.
Willkie Farr & Gallagher and Young Conaway Stargatt & Taylor are serving as legal counsel, AlixPartners officials are serving as financial adviser and chief restructuring officer, and Ducera Partners is serving as investment banker to the company. Paul Hastings is serving as legal counsel and Lazard is serving as investment banker to the first lien ad hoc group.
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