After a heavily-contested evidentiary hearing, a substantial portion of the assets of Wagstaff Minnesota, Inc., an owner-operator of KFC franchise restaurants in five states, was acquired by one of its key competitors, AFC Enterprises (the owner of the Popeye’s Louisiana Kitchen restaurant chain). The $13.8 million deal was completed in November 2012. Freeborn represented the Official Committee of Unsecured Creditors during the sale process.
The sale included the personal and real property for 28 KFC franchise restaurants located in Minnesota and California. Despite strong opposition from the existing franchisor, KFC Corporation, the U.S. Bankruptcy Court for the District of Minnesota held that these assets could be sold in a private sale transaction to AFC Enterprises, in light of the fact that the debtors’ senior secured lender, GE Capital Corporation ("GECC"), who was substantially unsecured, supported the sale and opposed an eleventh-hour competing bid from a KFC-backed bidder. Notwithstanding GECC’s substantially undersecured position, Freeborn, on behalf of the creditors’ committee, successfully negotiated certain concessions that will allow unsecured creditors to receive a meaningful distribution in these cases.