TGI Fridays is making preparations for a bankruptcy filing, according to two reports.
The casual-dining chain was talking with advisers late last week about next steps, including bankruptcy, after the company was terminated as the manager of its whole business securitization last month, according to a Debtwire report.
And on Saturday, Bloomberg reported that the chain was huddling with lenders about financing to help fund the company through a Chapter 11 bankruptcy process and emerge as an operating company.
A filing could come within weeks, according to Bloomberg, and could happen in Texas, per Debtwire. Bloomberg noted that TGI Fridays’ plans aren’t final and could change.
Both reports cited anonymous sources familiar with the situation. TGI Fridays had not responded to a request for comment as of publication time.
Dallas-based TGI Fridays has struggled for years to generate sales growth. The recent inflationary environment seems to have exacerbated those issues, as it has for many legacy casual-dining brands. The chain has closed about 50 restaurants around the country this year, including at least a dozen since September. It currently has 215 restaurants in the U.S., according to its website.
Also in the past month, TGI Fridays lost control of most of its assets and had a proposed acquisition by U.K. franchisee Hostmore PLC fall through.
Those troubles stem from the company’s $375 million whole business securitization (WBS) from 2017. A WBS is a form of financing in which a company issues bonds backed by future, cash-generating assets, such as royalties paid by franchisees.
In September, a trustee terminated TGI Fridays as the manager of its WBS, in part because it overpaid itself a management fee from the securitization. The trustee then put a backup manager in charge of some of the chain’s operations, including its franchise business and royalty stream.
Bond-rating agency KBRA said it was the first manager termination involving a WBS since the financial crisis.
Days later, Hostmore called off plans to acquire Fridays, citing the uncertainty brought on by the termination. Hostmore then filed for the U.K. equivalent of bankruptcy and closed 35 locations.
Bankruptcy filings related to whole business securitizations are rare, Debtwire reported.
If TGI Fridays does file for bankruptcy, it would become the third casual-dining chain to do so this year, joining Red Lobster and Buca di Beppo. Dozens of other restaurant companies have filed for bankruptcy this year amid mounting debt and falling traffic.
TGI Fridays was founded in New York City in 1965 as a laid-back singles bar. It would later evolve into one of the first casual-dining chains and then into an international brand, with more than 600 restaurants worldwide as of last year.
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