It listed assets of US$50 million to US$100 million and liabilities in the same range in its petition
[ATLANTA] Hooters of America has filed for bankruptcy as the casual-dining brand known for its chicken wings and skimpy server uniforms struggles to lure customers.
The Atlanta-based company filed for Chapter 11 bankruptcy in the Northern District of Texas on Monday (Mar 31), court documents show. It listed assets of US$50 million to US$100 million and liabilities in the same range in its petition.
High labour costs, competition from cheaper fast-food chains and declining restaurant traffic overall have taken a toll on casual-dining restaurants. Seafood restaurant chain Red Lobster went bankrupt last year after a money-losing “endless shrimp” promotion, while TGI Friday’s filed for Chapter 11 after struggling to turn around its business.
The company is seeking approval of US$40 million of debtor-in-possession financing from certain of its existing lenders, including US$35 million of new capital, it said in a press release on Monday. That would provide the company with ample liquidity to support operations during the chapter 11 process, which is expected to last up until August, according to the statement.
Hooters’ founders plan to make the chain more family-friendly as a way to turn things around, Neil Kiefer, chief executive officer of the founder-owned unit, HMC Hospitality Group, told Bloomberg News in a recent interview.
A turnaround plan would likely see HMC and other operators of Hooters franchises take over most of the US locations currently owned and run by Hooters of America, though some may close.
Hooters’ complex debt financing could be one of the wrinkles in a restructuring. Its bonds are packaged as whole-business securitisations, through which it pledges most of its assets, including franchise fees, as collateral. BLOOMBERG
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