The bankruptcy court denied the ad hoc group’s emergency motion, with the objection citing ‘no actual emergency’

Shortly after an ad hoc group of FAT Brands investors filed a lawsuit demanding the immediate suspension of Andy Wiederhorn as CEO alleging bankruptcy rules violations, FAT Brands submitted an objection to the court, calling the emergency request “a personal attack.”

The Southern District of Texas Bankruptcy Court denied the emergency motion, agreeing with FAT Brands’ objection, which argued that “there is no actual emergency” and that any concerns should be addressed during mediation.

According to the original lawsuit, less than 48 hours after FAT Brands’ first bankruptcy hearing, Wiederhorn directed the sale of 9 million shares of Twin Peaks equity to White Lion Capital for $3.1 million without consulting the special committee or obtaining prior court approval, an action that the group argued is in violation of bankruptcy proceedings and securities law.

In its objection, FAT Brands acknowledged the transaction but stated it was a mistake stemming from unfamiliarity with bankruptcy procedures, rather than an act of self-interest or misconduct. The company emphasized that the funds from the stock sale are being held in a separate account and have not been used. Additionally, FAT Brands noted that it has implemented new governance measures, including empowering a special committee and a chief restructuring officer to oversee all restructuring decisions.

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“Abruptly removing Mr. Wiederhorn now would be disruptive, likely value-destructive to the debtors’ operations, and accordingly imprudent,” the company argued in its objection. “The debtors have just entered Chapter 11 and are working hard to stabilize their business and mediate a comprehensive resolution while securing funding as quickly as possible.”

With the emergency motion denied, FAT Brands’ bankruptcy proceedings will continue as planned. Both sides will remain in mediation through February to attempt to resolve their differences. If mediation fails, the court will review a request to appoint a trustee to oversee the case.

Source https://www.nrn.com/restaurant-finance/fat-brands-calls-investor-group-s-request-to-suspend-ceo-andy-wiederhorn-a-personal-attack-