Avoid FAT Brands After Twin Hospitality Spinoff

2025-02-18 02:29:12 ET

Summary

• FAT Brands completed the spinoff of Twin Peaks in January, shedding roughly $400 million of debt.
• Both companies have fallen significantly since the spinoff was completed.
• FAT's liquidity balance has collapsed, with its total debt burden still at $1 billion post-spinoff.
• The common and preferred payments remain at risk, with the preferreds trading at a 60% discount to their liquidation value.

FAT Brands' ( FAT ) ( FATBB ) long-awaited spinoff of its largest restaurant brand Twin Peaks ( TWNP ) was completed in January in a deal that also saw the newly public TWNP take on the Smokey Bones restaurant chain. TWNP is expected to generate at least $580 million in sales in its fiscal 2025 with FAT also reducing its total debt burden by $400 million through the spinoff. FAT will retain 95% ownership in TWNP, floating only 5% of the company. The company has seen its market cap drop significantly since the spinoff was completed, with the commons down by around 36% and TWNP dropping by 46%. FAT at its roughly $65 million market cap remains a sell with a still heavy debt burden and negative free cash flow that will continue to erode liquidity....

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