Krystal Co., the Southern burger chain founded nearly 90 years ago, is selling itself out of bankruptcy to an affiliate of its senior lender Fortress Investment Group LLC, WSJ Pro Bankruptcy reported. Bankruptcy Judge Paul W. Bonapfel said yesterday that he will approve the deal Krystal entered into last week with Fortress to sell substantially all of its assets, including about 170 corporate-owned locations in nine states. Krystal also has roughly 100 additional franchise locations. The sale is in the form of a $27 million credit bid, meaning Fortress will buy the company in exchange for canceling some of Krystal’s debt. The sale, scheduled to close next week, also includes the assumption of liabilities up to $21.5 million by Fortress. The quick-service restaurant chain was forced to close all of its dining room operations because of the coronavirus pandemic, but continued to serve customers using its drive-through and delivery services, Krystal’s bankruptcy lawyer Sarah R. Borders of King & Spalding LLP said during the hearing. As a result, Krystal’s revenue fell significantly and it took actions to preserve liquidity, including workforce and expense reductions, she said. Before the coronavirus pandemic, the Dunwoody, Ga.-based burger chain had more than 10 potential interested buyers. But that quickly changed and left Krystal facing “a very real prospect of a broken sale process and a complete liquidation,” Ms. Borders said during the hearing.
