Meritage Hospitality Group, a large restaurant operator, has voluntarily filed petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Western District of Michigan. The company took this step to strengthen its balance sheet and establish a sustainable capital structure that positions Meritage for long-term success.
The company anticipates maintaining restaurant-level operations during the restructuring process and intends to continue paying its approximately 9,000 team members their wages and benefits without interruption, subject to court approval of customary “first day” motions described below. The company also intends to continue honoring its commitments to guests and to pay suppliers and vendors in the ordinary course for goods and services provided on or after the filing date.
The filing follows a candid assessment of the financial pressures facing the company, including the sustained system-wide headwinds affecting the broader Wendy’s brand over the past few years. The company has a high level of confidence in the opportunity for a brand turnaround. Because the substantial majority of Meritage’s restaurant portfolio operates under Wendy’s brand, those system-wide pressures have had a significant impact on the company’s financial position. After more than a year of working constructively with its lenders and its franchisor toward a solution, the company’s board of directors and management team determined that a voluntary, court-supervised restructuring is the most effective and proactive path to strengthen Meritage’s finances, address these headwinds directly and protect the long-term interests of its stakeholders, team members, guests and communities.
The company is in the process of obtaining debtor-in-possession (DIP) financing and expects this financing, together with cash generated from ongoing operations, to provide sufficient liquidity to support the business and meet its obligations throughout the Chapter 11 process. In connection with the filing, the company will file a series of customary “first day” motions seeking court authorization to continue paying employee wages and benefits, to honor certain customer programs and to obtain other necessary relief so that it can maintain operations in the ordinary course.
The company believes that the Chapter 11 process will enable it to strengthen its balance sheet and create financial flexibility. The company plans to use this process to connect with key stakeholders and determine the best way to maximize value for all stakeholders.
The company’s restaurants will continue to serve guests every day, and its team members remain the heart of this business. This process will provide the company with the tools to address its financial pressures and allow it to explore all strategic alternatives to maximize value on a timeline and with a plan to position the business for long-term success. The company remains grateful for the continued loyalty and commitment of its team members, guests, vendors and communities as it moves forward through this restructuring process.
McDonald Hopkins is serving as legal counsel and Fort Dearborn Partners is serving as restructuring advisor to the Company in connection with this process.
