Voluntary Chapter 11 Filing
Meritage Hospitality Group has sought Chapter 11 protection on a voluntary basis, submitting its petitions to the U.S. Bankruptcy Court for the Western District of Michigan. According to the company, the move is meant to shore up its balance sheet and put in place a capital structure that can support long-term success. The filing came after the company weighed the financial strains it has faced, among them persistent, system-wide challenges weighing on the wider Wendy's brand in recent years. Since Wendy's accounts for the overwhelming share of Meritage's restaurants, those strains have weighed heavily on its finances.[S1]
Operations to Continue During Restructuring
Meritage expects to keep its restaurants running while the restructuring unfolds. Subject to court approval of the usual first day motions, the company aims to keep paying roughly 9,000 team members their wages and benefits with no interruption. It further plans to keep its promises to guests and to compensate suppliers and vendors as normal for goods and services delivered on or after the filing date. Meritage is working to secure debtor-in-possession financing which, alongside cash generated by continuing operations, should give it enough liquidity to cover its obligations throughout the Chapter 11 case.[S1]
Background and Path Forward
Before filing, the company spent over a year working constructively with its lenders and the franchisor. Meritage's board of directors and management concluded that a voluntary restructuring overseen by the court is the most effective and proactive route to firm up the company's finances, tackle the headwinds head-on, and safeguard the long-term interests of stakeholders, team members, guests, and communities. The company expects the process to strengthen its balance sheet and open up financial flexibility, and it intends to engage key stakeholders to find the best way to maximize value for all of them. McDonald Hopkins serves as legal counsel, with Fort Dearborn Partners as restructuring advisor.[S1]
