FAT Brands Implements Liquidation Plan

FAT Brands Implements Liquidation Plan


Debtor(s)	FAT Brands Inc. and its affiliated debtors
Court	U.S. Bankruptcy Court for the Southern District of Texas, Houston Division
Case Number	26-90126
Petition Date	January 26, 2026
Confirmation Date	July 27, 2026

Case Snapshot

The first-day declaration establishes the petition date and venue; the confirmation order establishes plan approval. This account uses the July 31 effective-date notice for the transition to implementation and the confirmed plan for recovery terms. Effectiveness does not establish that beneficiary distributions have been paid or that the cases are closed.

From Restaurant Sales to a Liquidation Trust

FAT Brands entered Chapter 11 with eighteen restaurant brands and approximately $1.4 billion of securitization-note principal. Four securitization structures held substantially all of the debtors’ material revenue-generating assets. A fifth note series, the Resid Notes, depended on management fees, permitted residual payments and specified Twin Hospitality shares, according to the first-day declaration.

The declaration ties the liquidity problem to the gap between management fees received and the cost of supporting the underlying businesses. It also reports more than $72 million in penalty interest and amortization payments since 2022. The debtors said additional borrowing, equity raises and sales of retained notes could no longer sustain operating costs and debt obligations. These were the debtors’ explanations for the filing. First-day declaration.

The debtors conducted an asset auction on April 27, 2026. On May 19, the court entered orders approving the sale of Hot Dog on a Stick assets to Amazing Brands and the transaction with TABCO International Food Catering. The confirmed plan identifies FBG Bid Co. and TWNPKS Bid Co. as the NewCos formed to acquire assets in the sale transactions. Those entities also provide the wind-down funding and hold the related funding claims. Confirmed plan, definitions of NewCos and NewCo Funding Claims.

Smokey Bones had a different operating outcome. A spokesperson told USA TODAY that all locations had ceased operations as of April 28, 2026. That confirmation supports the nationwide shutdown without relying on inconsistent location counts in contemporaneous reports. USA TODAY.

What the Wind-Down Funding Covers

The confirmed plan defines the Funding Amount as not less than $9.23 million in cash funded by the NewCos into the Wind-Down Account. It permits decreases connected with the Professional Fee Surplus and increases tied to specified taxes or agreed wind-down budget adjustments. Separately, the Liquidation Trust Funding Amount is at least $1.5 million, subject to an increase connected with that surplus, for prosecuting and monetizing trust assets and paying initial trustee costs or other budgeted uses. Confirmed plan, funding definitions.

The NewCo Funding Claims equal the Funding Amount and increase by 12% annually on unrecovered amounts. Unspent portions of a specified trustee and agent holdback are remitted to the NewCos and reduce those claims under the plan’s adjustment mechanism. The funding therefore carries a repayment entitlement that must be considered when assessing proceeds available to other beneficiaries. Confirmed plan, NewCo Funding Claims.

The plan also allows $445.9 million of Noteholder Deficiency Claims—claims not satisfied through the noteholder group’s credit-bid transaction. This is an allowed claim amount, not additional cash available for distribution. Holders receive Class D Liquidation Trust interests, distinct from the Class C interests allocated to general unsecured creditors and specified Resid-related claims. Confirmed plan, beneficiary and deficiency-claim definitions.

How the Confirmed Recovery Waterfall Works

The waterfall starts with costs and priority obligations. It does not send the first proceeds directly to unsecured creditors or even directly to the NewCos. The following table summarizes the sequence in the confirmed plan, Article IV’s recovery-waterfall provisions.

Stage	Distribution priority
First	Liquidation Trust fees and expenses not otherwise covered by the trust funding amount
Second	Residual allowed administrative and priority tax claims, after application of the Wind-Down Account
Third	100% to Class A, the NewCos, until NewCo Funding Claims are repaid
Fourth	The next $18.9 million: 65% to Class A, 15% to Class B and 20% to Class C
Fifth	Remaining proceeds: 15% to Class B, 50% to Class C and 35% to Class D; after Class B receives $10 million on its Class B interests, its share falls to zero and Class C’s rises to 65%

Confirmed Liquidation Trust Recovery Waterfall

The beneficiary labels matter. Class B consists of holders of allowed Resid Non-Retained Notes Claims. Class C combines ordinary general unsecured claims with several categories of Resid deficiency and indemnity claims. Class D consists of allowed Noteholder Deficiency Claims. Accordingly, the 20%, 50% and eventual 65% Class C allocations are not percentages reserved exclusively for ordinary trade creditors. Confirmed plan, Liquidation Trust beneficiary definitions.

The plan imposes further priorities within Class C. In the fourth stage, amounts otherwise allocated to Class C-2 interests first support a $500,000 aggregate payment to holders of Resid Priority Indemnity Claims. Additional provisions redirect allocations among Resid-related subclasses until specified recovery thresholds are reached. Those provisions, together with trust expenses and the amount of allowed claims, prevent the headline waterfall percentages from serving as an estimate of any individual creditor’s recovery. Confirmed plan, recovery waterfall.

Releases Preserve Claims Against Wiederhorn

The confirmed plan expressly excludes Andrew Wiederhorn, his affiliates, family members and entities owned or controlled by him or his family from the definition of Released Party. Its Liquidation Trust assets include the debtors’ claims against Wiederhorn and specified related persons and entities, alongside retained causes of action and other remaining assets. Preserving those claims does not establish liability or a collectible recovery. Confirmed plan, Released Party and Liquidation Trust Assets definitions.

For other parties, the court found the third-party release consensual under controlling precedent as applied to releasing parties that did not timely object or opt out. The plan uses different consent procedures for different voting categories: it includes an opt-out mechanism for specified claimholders and an affirmative opt-in requirement for holders deemed to reject. Unresolved timely written objections also exclude an entity from the Releasing Parties definition. Confirmation order and attached plan.

Implementation After July 31

The July 31 notice reports both effectiveness and substantial consummation. It also identifies August 31, 2026 as the deadline for administrative claims, final professional fee requests and claims arising from contract or lease rejection pursuant to the plan. Those are historical notice terms, separate from any earlier general claims deadline. Confirmation and effective-date notice.

Who maintains the public case materials? Omni Agent Solutions is the claims and noticing agent identified in the effective-date notice. The notice directs readers to its public case website for the plan, confirmation order and other filed materials. Effective-date notice.

For related coverage, see Twin Hospitality Group’s bankruptcy. Ask our AI chat to review the FAT Brands docket, including the filings and orders behind the liquidation. For docket monitoring and AI research access, see ElevenFlo pricing.

The remaining economic question is how much the trust can monetize after costs and senior payment obligations. The plan gives the trustee reasonable discretion over the amount and timing of distributions; its allocation percentages establish an order of payment, not a guaranteed recovery. Confirmed plan, recovery waterfall.