Ad hoc creditors sue to suspend FAT Brands CEO amid Chapter 11

Creditors holding roughly $990 million to nearly $1 billion of FAT Brands debt asked a Texas bankruptcy court to temporarily suspend CEO Andy Wiederhorn without pay, alleging he authorized an unauthorized post-filing sale of Twin Peaks equity that jeopardized the Chapter 11 reorganization.

The ad hoc group’s court papers say Wiederhorn directed the sale of 9 million Twin Peaks shares to White Lion Capital for $3.1 million and that those shares were later resold to the public for an unspecified amount. The filing characterizes the transaction as outside the ordinary course of business and conducted without the special committee’s sign-off or prior court approval, claims that, if sustained, would violate bankruptcy rules and could raise securities-law concerns. The creditors wrote in court documents: “A person incapable of distinguishing a public company’s property from his own, especially a public company subject to the bankruptcy court’s oversight, is not fit to remain in a fiduciary capacity.”

FAT Brands and its spin-off Twin Hospitality filed voluntary Chapter 11 petitions on January 26, citing as much as $1.5 billion in total debt and earlier disclosures that nearly $1.3 billion in securitized debt was due. The ad hoc noteholders say their holdings account for about $990 million, roughly 85 percent of the company’s securitization notes, giving them leverage in the restructuring fight.

Procedurally, the ad hoc group filed its motion in the U.S. Bankruptcy Court for the Southern District of Texas in early February; the court has tabled a hearing on the suspension request until early March. At a bankruptcy hearing, Jason Zakia of White & Case, representing a group of lenders, warned the court: “We remain concerned something might happen again.” Meanwhile, lenders, the company and vendors agreed to interim governance measures to constrain management during the process, including giving a select committee broader control and requiring the chief restructuring officer and his deputy to sign off on disbursements.

For restaurant workers and franchisees, the dispute could translate into concrete operational pressure. Slower approvals for vendor payments, paused capital projects and tightened cash controls under CRO oversight can delay supplies, store maintenance and franchisee support. Employees at Twin Peaks and other FAT Brands concepts may face uncertainty around scheduling, staffing levels and benefits if franchise partners lose working capital or corporate support during litigation and the restructuring.

The dispute is layered atop separate litigation: Investor 352 Fund, identified as a large bondholder, filed a pre-bankruptcy suit seeking $109 million and promised Twin Peaks Class B Common stock days before the Chapter 11 filing. With multiple lawsuits and interim governance orders in play, the next steps include the early March hearing and any filings that clarify the sale’s timing and proceeds. For workers and managers in the system, the coming weeks will show whether the reorganization stabilizes operations or deepens strain on restaurants already dealing with tight margins.