Hooters of America, which is a chain of restaurants and cafes, is reportedly heading towards bankruptcy and for this purpose, it is working with creditors to develop a plan to restructure its business.
The restaurant, famous for its staff members wearing tight-fitting sporty uniforms, is preparing to file for bankruptcy through the concerned court in the coming months, Bloomberg reported.
As part of its financial strategy, Hooters is collaborating with the law firm Ropes & Gray to prepare for a filing. According to the publication, the court process is expected to begin within the next two months.
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The plans to file for bankruptcy, which are still in development, however, are not yet final, and the company has not made any official statements regarding the matter.
Hooters is reportedly in conversation with turnaround consultants from boutique firm Accordion Partners as well to address its ongoing financial challenges.
{{/usCountry}}Hooters is reportedly in conversation with turnaround consultants from boutique firm Accordion Partners as well to address its ongoing financial challenges.
{{/usCountry}}Some of Hooters' debtholders have enlisted the services of Houlihan Lokey Inc. for advice on the situation.
Why is Hooters facing bankruptcy?
According to Bloomberg, Hooters has been facing financial struggles due to a significant decrease in customer traffic to its stores, which has also led to the closure of some of its locations.
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Hooters also have a large debt burden that the company is trying to rectify through bankruptcy, as per reports.
The company borrowed $300 million in asset-backed bonds in 2021, according to Bloomberg statistics.
The asset-backed bonds are packaged as whole-business securitizations — through which a company pledges most of its assets, including franchise fees, as collateral — a product popular among restaurant chains, fitness clubs and other businesses with franchised stores.
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Since the company's future is cloudy, the forthcoming bankruptcy filing will be a vital move in the company's effort to reorganize and end the brand's chronic liquidity crunch.
Reps for Hooters, Accordion Partners, and Ropes & Gray declined to comment on the situation.