Fat Brands extends securitization facility to 2025

Fat Brands Inc. (NASDAQ:FAT), a global franchising company, has announced an amendment to its whole business securitization credit facility related to its Fazoli’s and Native Grill & Wings brands. This amendment, effective as of March 28, 2025, extends key financial dates and relaxes certain covenants.

The amendment, known as Omnibus Amendment No. 1, extends the Anticipated Call Date for all tranches of Notes from July 2023 to October 2025. Should the Issuer not repay or refinance the Notes by this date, an additional interest rate of 1.0% per annum will apply. With total debt standing at $1.57 billion and a concerning current ratio of 0.3, as revealed by InvestingPro data, this extension appears crucial for the company’s financial management. Moreover, the Anticipated Repayment Date for the Class A-2 Notes has been pushed from January 2025 to July 2026, with a 2.5% per annum additional interest accruing if not repaid or refinanced by then.

Financial covenants linked to the debt service coverage ratios and leverage ratios of the Issuer have been eased, postponing potential Rapid Amortization Event, Cash Flow Sweeping Event, or Event of Default to dates in 2026. The amendment also modifies the definition of "Permitted Asset Dispositions" to allow the company to dispose of unprofitable real estate leases and subleases, facilitating the refranchising of corporate-owned Fazoli’s restaurants.

The agreement grants "Majority of Controlling Class Members" the right to instruct the "Controlling Class Representative" under the Amendment Documents. Conforming changes to align with these revisions have also been made to other Amendment Documents.

The Omnibus Amendment aims to provide Fat Brands with additional flexibility in managing its securitization facility and to support the ongoing operations and growth of its Fazoli’s and Native Grill & Wings brands. The full text of the Omnibus Amendment is filed with the SEC and incorporated by reference.

This strategic financial maneuver by Fat Brands Inc. is based on information from a recent SEC filing. InvestingPro analysis indicates the company is quickly burning through cash, with an overall Financial Health score rated as WEAK. Investors seeking deeper insights into Fat Brands’ financial position can access comprehensive analysis and additional ProTips through InvestingPro’s detailed research reports.

In other recent news, Fat Brands Inc. reported a decline in revenue for the fourth quarter of 2024, with total revenue decreasing by 8.4% to $145.3 million. The company also recorded a net loss of $67.4 million or $4.06 per diluted share. Despite these results, Fat Brands plans to open over 100 new locations in 2025, indicating a focus on future growth. Additionally, Fat Brands declared a monthly cash dividend of $0.171875 per share for its Series B Cumulative Preferred Stock, to be distributed on April 21, 2025.

In another development, Loop Capital revised its price target for Fat Brands, lowering it to $12 from $15, while maintaining a Buy rating. This adjustment followed the company’s fourth-quarter financial results, which did not meet expectations. Fat Brands also announced adjustments to the exercise prices of stock options for its directors and executive officers, following the distribution of shares from its Twin Peaks and Smokey Bones restaurant brands to common stockholders. These recent developments reflect ongoing strategic efforts by Fat Brands to manage its capital structure and reward stakeholders.

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