On May 18, 2020, our client The Krystal Company (“Krystal”) successfully closed on the sale of substantially all of its assets to an affiliate of Fortress Investment Group LLC (“Fortress”) pursuant to an Asset Purchase Agreement (the “APA”) entered into in connection with the chapter 11 bankruptc y cases of Krystal and its affiliates filed on January 19, 2020 in the U.S. Bankruptcy Court for the Northern District of Georgia.
Prior to executing the APA with Fortress, Krystal was forced to close its dine-in operations and reduce its workforce as a result of the COVID-19 pandemic. Faced with the very real prospect of a broken sale process and a complete liquidation, the King & Spalding team pressed forward and identified and negotiated an asset purchase agreement with a potential stalking horse purchaser, Nashville Capital Group, LLC. At the same time, the majority of Krystal’s secured debt, which was held by Wells Fargo, National Association, among other lenders, traded to Fortress, at which point Fortress put forward a significantly higher and better offer for Krystal’s assets, consisting of a credit bid in the amount of $27 million and the assumption of significant administrative expense liabilities, ensuring that vendors, employees and other post-petition creditors would be paid in full. The deal negotiated with Fortress resulted in the continued viability of Krystal as a going concern, provided for an improved recovery to the bankruptcy estates, and fully resolved potentially expensive and time-consuming threatened litigation between Krystal, its secured lenders, and the unsecured creditors’ committee.
Krystal is engaged primarily in the development, operation, and franchising of quick-service restaurants in the southeastern United States and is famous for its iconic square hamburger patty slider called a “Krystal” with a steamed bun, diced onions, pickle, and mustard. Fortress is a leading, highly diversified global investment manager with approximately $43.5 billion of assets under management.