Fatburger Owner Faces Allegations It Masked Liquidity Crunch

Core Viewpoint - FAT Brands Inc. is facing legal action from a shareholder for allegedly concealing the extent of its debt, which has contributed to a deteriorating financial outlook and a significant drop in its stock price [1][6]. Financial Situation - The company, which owns brands like Fatburger and Johnny Rockets, has resorted to high-interest loans known as merchant cash advances as its financial condition worsened [2]. - FAT Brands has approximately $1.2 billion in whole-business securitization debt, which it cannot repay, raising concerns about a potential bankruptcy filing [4]. - The shareholder claims that FAT Brands has over $1.4 billion in debt and is unlikely to meet its repayment obligations [5]. Legal Issues - The shareholder's complaints allege that FAT Brands misrepresented its debt as cash to secure new financing, indicating deeper financial troubles not reflected in public disclosures [3]. - The company has until next week to respond to the shareholder's complaint [6]. Debt and Bond Transactions - The shareholder is seeking access to the company's financial records, alleging that FAT Brands engaged in bond sales that misrepresented its financial obligations [10]. - FAT Brands defaulted on a put option related to bond sales, which were inaccurately treated as ordinary cash transactions [11]. Management and Related Transactions - Allegations include that FAT Brands authorized significant cash bonuses and stock units to management, which should have been allocated to debt repayment [13][14]. - The CEO, Andy Wiederhorn, has faced legal scrutiny for allegedly concealing payments and has settled a separate investor lawsuit for $10 million [15].