Zips Car Wash: Lenders Take Control After 84-Day Restructuring
Zips Car Wash filed chapter 11 in the Northern District of Texas on February 5, 2025, emerged on April 30 after a lender-backed balance-sheet reset, and still had claims objections and lease appeals working through the docket into March 2026.
Zips Car Wash, one of the largest privately owned express car wash operators in the United States, filed chapter 11 on February 5, 2025 with a prepackaged plan already negotiated with its secured lenders. The Plano-based company reached the petition date with $653.9 million of funded debt, $1 million of cash, and senior secured term loans that had matured five weeks earlier. The court confirmed a lender-backed plan on April 18 and the plan went effective on April 30, completing a debt-for-equity swap in 84 days that transferred ownership from private equity sponsor Atlantic Street Capital to the term loan lender group, cut funded debt by approximately $279 million, and preserved going-concern operations at more than 230 locations.
The First Day Declaration describes Zips as operating more than 260 locations across 23 states under the Zips, Jet Brite, and Rocket Express brands, with approximately 1,800 employees and about 625,000 Unlimited Wash Club members generating more than two-thirds of the company's $303 million in annual revenue. Post-emergence, the docket remained active through claims objections, lease disputes, and a district-court appeal that was not dismissed until March 6, 2026.
| Debtor(s) | Zips Car Wash, LLC (10 jointly administered debtors) |
| Court | U.S. Bankruptcy Court, Northern District of Texas |
| Case Number | 25-80069 |
| Judge | Hon. Michelle V. Larson |
| Petition Date | February 5, 2025 |
| Confirmation Date | April 18, 2025 |
| Effective Date | April 30, 2025 |
| Funded Debt at Filing | $653.9 million |
| DIP Facility | $82.5 million |
| Exit Facilities | $390 million |
| Estimated GUC Recovery | 10% to 21% |
| Locations at Filing | 260+ across 23 states |
| UWC Members at Filing | ~625,000 |
| Table: Case Snapshot |
Filing Background and Industry Pressures
Zips entered chapter 11 after its senior secured term loans matured on December 31, 2024. Required lenders agreed to forbear from exercising remedies long enough for the debtors to file with a prepackaged plan supported by 100% of the lender group and the existing equity holder. The company announced the filing as a strategic action to strengthen its financial foundation while continuing ordinary operations. The capital structure at filing included the $653.9 million of funded term loans, $229 million of senior preferred equity, and $70.8 million of junior preferred equity.
The first day declaration attributed the filing to several converging pressures: rising interest costs on the matured term loans, inflation-driven labor pressure across the car wash workforce, softened discretionary consumer spending, and lease obligations the debtors described as off-market. Zips also said more than 900 new car wash sites had opened annually over the prior five years, intensifying competition in what had been a consolidation-driven sector fueled by subscription revenue and PE capital. Hurricane Helene in September 2024 compounded the liquidity strain, affecting more than 120 of Zips's roughly 260 locations and reducing asset-sale proceeds. The restructuring advisory firm AP Services had been engaged since September 2024, with Kevin Nystrom serving as chief restructuring officer through the filing and emergence.
Sponsor investment and losses. Atlantic Street Capital acquired majority control of Zips in 2020 and formed a $1.1 billion single-asset continuation fund in 2022. As performance deteriorated, Atlantic Street and co-investors supplied approximately $38 million of liquidity infusions beginning in July 2023, an additional $70 million in June 2024, and a $30 million guaranty of credit agreement debt. The total rescue financing exceeded $108 million, all of which was wiped out when the plan cancelled existing equity interests without distribution. Bloomberg reported that private credit lenders would take over the company through the bankruptcy, and a subsequent Bloomberg analysis said the case exposed flaws in private credit valuations. A Private Equity Stakeholder Project report later cited the filing as one of several PE-backed chapter 11 cases that accounted for 70% of large U.S. bankruptcies in Q1 2025.
Capital Structure and DIP Financing
Prepetition debt. The $653.9 million of funded debt consisted entirely of senior secured term loans that had matured on December 31, 2024. Brightwood Loan Services LLC served as administrative agent for the prepetition term loan facility. In addition to the funded debt, the capital structure included the $229 million of senior preferred equity and $70.8 million of junior preferred equity, bringing total preferred equity to approximately $299.8 million. Both tiers of preferred equity were cancelled under the plan without recovery.
DIP package. The debtors bridged the case with an $82.5 million DIP facility from Brightwood, the same agent that held the prepetition term loan debt. The facility included $30 million of new money ($20 million at the interim stage and $10 million at the final stage) and a $52.5 million roll-up of prepetition term loans. Pricing accrued at SOFR plus 7.25%, payable in kind unless the debtors elected to convert to cash pay. Maturity was the earliest of eight months after closing, a plan effective date, acceleration after default, conversion or dismissal, or a sale of substantially all assets. Adequate protection included replacement liens, superpriority claims, and professional-fee protections, all subject to a carve-out. The final DIP order was entered on March 18, 2025.
Exit facilities. The restructuring replaced the matured prepetition debt with $390 million of exit facilities: a $150 million New HoldCo term loan, a $225 million New OpCo term loan, and a $15 million New OpCo revolving credit facility, reducing funded debt by approximately $279 million from the prepetition level.
Plan Terms and Creditor Recovery
The debtors filed the plan and disclosure statement on the petition date, consistent with a prepackaged case. The amended disclosure statement, filed on March 17, 2025, projected a 10% to 21% recovery range for general unsecured creditors, with the low end assuming no real-estate sale proceeds and the high end assuming the full real-estate contribution cap. The disclosure statement was conditionally approved on March 18, 2025, and the confirmed plan gave term loan lenders their pro rata share of New OpCo term loans, New HoldCo loans, and 100% of the reorganized company's common equity, subject to dilution from management incentive plan interests.
| Class | Claim Type | Treatment | Estimated Recovery |
|---|---|---|---|
| -- | DIP Facility Claims | Paid in full or rolled into exit facilities | 100% |
| -- | Term Loan Claims | New term loans + 100% new equity | Full (via equity conversion) |
| 4 | General Unsecured Claims | GUC trust interests | 10% to 21% |
| -- | Preferred Equity Interests | Cancelled | 0% |
| -- | Common Equity Interests | Cancelled | 0% |
Total estimated general unsecured claims ranged from $806 million to $809 million. The liquidation analysis showed that DIP facility claims would recover only 20% to 24% in a hypothetical chapter 7 and term loan claims would recover nothing, confirming that all classes received greater recovery under the plan than in liquidation.
GUC trust funding. The GUC trust was funded with $2.5 million of cash, 25% of net proceeds from certain owned real estate up to an additional $2.5 million cap, and any unspent DIP-budget amounts allocated to committee professionals and Gray Reed, net of trust expenses. The confirmation-and-effective-date notice made the plan binding on April 30, 2025. The first post-confirmation report says the reorganized debtors funded a $2.5 million escrow for the official unsecured creditors committee and a $20.5 million professional-fees escrow on the effective date.
The court confirmed the plan on April 18, 72 days after the petition date. The official committee of unsecured creditors was appointed on February 21, 2025. The general claims bar date was April 3, 2025.
Post-Confirmation Activity
The case moved into claims administration rather than closing after the April 30 effective date. By October 2025, the motion to extend claim-objection deadlines said approximately 431 unresolved claims worth more than $64 million remained. The reorganized debtors and the GUC trustee asked to move the administrative claim objection bar date and the claims objection deadline from October 27, 2025 to April 25, 2026.
Omnibus objections. The GUC trust filed multiple omnibus objections targeting duplicate, amended, superseded, satisfied, and deficient claims. The amended fifth omnibus objection in October 2025 targeted up to 100 claim forms that lacked an amount certain, a clear basis, or supporting documentation. The court sustained that objection on November 26, 2025. Earlier omnibus objections were sustained in late October and early November, and a separate shareholder claim objection was sustained on November 17, 2025. Subsidiary cases were closed on October 20, 2025, while the main case remained open for claims administration and the remaining litigation.
Leadership transition. Zips announced Pete Nani as chief executive officer at emergence. Nani had previously served at Mister Car Wash, Wash Depot Holdings, and Clean Freak/Rainstorm (Circle K). The company expanded its leadership team with a chief operating officer in January 2026. Industry coverage reported the restructuring complete as of April 30, 2025.
Lease and Contract Disputes
Atlantic Street consulting agreements. In the Atlantic Street objection, the sponsor said Zips paid a $650,000 cure amount on May 1, 2025 for two consulting agreements and then filed a May 5 notice removing the agreements from the assumption schedule and treating them as rejected. Atlantic Street argued the cure payment had finalized assumption. The reorganized debtors responded that the plan and confirmation order allowed schedule changes for 45 days after the effective date and that the payment was premature.
BVLY landlord dispute. BVLY Partners CLTZ Tyvola and BVLY Partners CLTZ Wilkinson argued their leases had been terminated before bankruptcy and could not be assumed. The June 6, 2025 order overruling that objection kept the debtors' assumption notice in place. The landlords challenged the assumption in district court, but the district-court dismissal order ended the consolidated appeals with prejudice on March 6, 2026, with each side bearing its own costs.
Operational footprint changes. Hilco Real Estate conducted site-level evaluations in November 2024, recommending rejection of 41 locations, approximately 16% of the prepetition footprint. Those rejections reduced the network from more than 260 locations to roughly 230 across 22 states.
Professional Retentions and Fees
The debtors retained Kirkland & Ellis as restructuring counsel, Gray Reed as Texas co-counsel, Evercore as investment banker, Hilco Real Estate as real-estate advisor, and AP Services as restructuring advisor providing CRO support through Kevin Nystrom. The official committee of unsecured creditors retained Pachulski Stang Ziehl & Jones as counsel and FTI Consulting as financial advisor.
Final and first-and-final fee applications filed after emergence requested approximately $15 million in total professional compensation. Kirkland & Ellis sought $5.3 million in fees and $130,000 in expenses. Hilco Real Estate, which managed the site-level evaluations and lease rejections, requested approximately $5 million. Evercore sought $1.2 million in fees plus $42,000 in expenses for investment banking services. Pachulski Stang sought approximately $1.1 million for committee counsel work, FTI Consulting requested $1.1 million as committee financial advisor, and Gray Reed sought $323,000 as local co-counsel. AP Services filed a separate application for a $1 million completion fee.
Case Timeline
| Date | Event |
|---|---|
| February 5, 2025 | Chapter 11 petitions filed; plan and disclosure statement filed |
| February 7, 2025 | First day hearings; interim orders entered |
| February 21, 2025 | Official Committee of Unsecured Creditors appointed |
| March 5, 2025 | Disclosure statement hearing |
| March 17, 2025 | Amended disclosure statement filed |
| March 18, 2025 | Disclosure statement conditionally approved; final DIP order entered |
| April 3, 2025 | General claims bar date |
| April 18, 2025 | Plan confirmed |
| April 30, 2025 | Plan effective date; emergence |
| June 6, 2025 | BVLY landlord objection overruled |
| October 9, 2025 | Motion to extend claim-objection deadlines filed |
| October 20, 2025 | Subsidiary cases closed |
| November 26, 2025 | GUC trust amended fifth omnibus objection sustained |
| January 21, 2026 | COO hire announced |
| March 6, 2026 | District court dismisses consolidated BVLY appeals |
Frequently Asked Questions
When did Zips Car Wash file for bankruptcy?
Zips and nine affiliates filed chapter 11 on February 5, 2025 in the U.S. Bankruptcy Court for the Northern District of Texas with $653.9 million of funded debt and approximately $1 million of cash.
Did Zips emerge from chapter 11?
Yes. The plan was confirmed on April 18, 2025 and went effective on April 30, 2025, completing the restructuring in 84 days.
Who owns Zips after bankruptcy?
The confirmed plan transferred control to the term loan lender group, which received new debt instruments and 100% of the reorganized company's common equity, subject to management incentive dilution. Atlantic Street Capital's equity was cancelled without distribution.
How much debt did the restructuring eliminate?
The plan cut funded debt by approximately $279 million, replacing $653.9 million of prepetition term loans with $390 million of exit facilities split across a HoldCo term loan, an OpCo term loan, and a revolving credit facility.
What did unsecured creditors receive?
General unsecured creditors, with estimated claims of $806 million to $809 million, received interests in the GUC trust. The amended disclosure statement projected recoveries of 10% to 21%, depending on real-estate sale proceeds.
Why was the case still active in 2026?
Post-confirmation filings show approximately 431 unresolved claims totaling more than $64 million, multiple omnibus objections, and lease-related appeals. The district court did not dismiss the consolidated BVLY landlord appeals until March 6, 2026.
Is Zips still operating?
Yes. The company emerged with Pete Nani as CEO, operates roughly 230 locations across 22 states, and expanded its leadership team with a COO hire in January 2026.
Who is the claims agent for Zips Car Wash?
Kroll Restructuring Administration LLC serves as the claims and noticing agent. The court-authorized role in this case anchors creditor notices and claims-register administration to the filed retention and noticing record.
For more chapter 11 coverage, visit ElevenFlo's bankruptcy blog.
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This article was researched and written with AI assistance, using court filings, public records, and news sources. AI-generated content can contain errors. Verify all information against primary sources before relying on it. This is not legal or financial advice. Read our full disclaimer.
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