Out West Restaurant Group - Chapter 11 Case Summary

Business Description

San Diego-based Cerca Trova Restaurant Group Holdings, Inc. ("Holdings") and its four Debtor affiliates (collectively, the "Debtors," and together with their non-Debtor affiliates, the "Company") operate 61 Outback Steakhouse restaurants (the "Restaurants") under franchise from Outback Steakhouse of Florida, LLC (the "Franchisor"). The Franchisor is a subsidiary of publicly traded Bloomin' Brands, Inc. ("Bloomin'"). The Restaurants are in California (31), Nevada (9), Arizona (8), Colorado (8), and New Mexico (5). For the twelve months ended August 23, 2026, the Company generated approximately $321 million of revenue and approximately $16.1 million of restaurant-level EBITDA.

As of June 28, 2026, there were 659 Outback Steakhouse restaurants in the United States. Bloomin' owned and operated 544 of them and franchisees operated 115. The Debtors operated 71 of those franchised locations, more than 60% of the U.S. Outback restaurants that Bloomin' does not own.

The Debtors are indirectly owned by an affiliate of H.I.G. Capital, LLC (together with its affiliates, "H.I.G."). They filed for Chapter 11 in the District of Delaware on November 2, 2026 (the "Petition Date") to sell substantially all of their restaurant assets as a going concern. The Franchisor is the stalking horse bidder.

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Corporate History

Origins and the California Partnerships

The Company's predecessor, T-Bird Restaurant Group ("T-Bird"), was incorporated in 1994 by Thomas J. Shannon, Jr. to develop the Outback Steakhouse franchise in California. For its first 20 years the Company grew one California restaurant at a time. Each restaurant was owned through its own limited partnership, with a general partner controlled by the founder, local investors as limited partners, a managing partner who ran the restaurant day to day, and a joint venture partner who oversaw a group of restaurants. In 1997, T-Bird began operating seven additional California restaurants for their third-party owners. In 2011, the Company obtained exclusive rights to develop Outback restaurants in California, later extended through November 22, 2031. By the end of 2014 it operated 56 locations.

H.I.G. Acquisition

On January 9, 2015, under an acquisition agreement dated November 21, 2014, an H.I.G. affiliate acquired the business. The purchase included the limited and general partnership interests in the 56 restaurant partnerships and the Company's management company. As part of the transaction the founder left the business, and certain former owners received earn-out notes.

Southwest Acquisition and the Master Franchise Agreement

On April 25, 2017, Debtor Cerca Trova Southwest Restaurant Group, LLC ("CT Southwest," then known as T-Bird Southwest Restaurant Group, LLC) bought 45 company-operated Outback restaurants from the Franchisor: 14 in Arizona, 16 in Colorado, 10 in Nevada and 5 in New Mexico. The price was approximately $31.1 million plus inventory and certain assumed liabilities. At the same time, the Company and the Franchisor entered into the Amended and Restated Outback Steakhouse Restaurant Territorial Master Franchise Agreement (the "Master Franchise Agreement"). It made the Company the exclusive Outback developer in those four states as well as California. The acquisition was financed with a Credit and Guaranty Agreement dated April 25, 2017 (as amended, the "Prepetition Credit Agreement") and a $5.0 million subordinated note from an H.I.G. affiliate.

After the acquisition, the Company rebranded its entities under the "Cerca Trova" name. Effective December 31, 2017, it merged its restaurant partnerships into Debtors Cerca Trova Steakhouse, L.P. ("CTS LP") and Cerca Trova Steakhouse, Inc. ("CTS Inc."). It completed more than 40 remodels, opened three new restaurants and relocated a fourth. One of the new restaurants was the first new Outback to open in California in nearly a decade. By the end of 2018 the Company operated 99 restaurants with annual sales of more than $340 million, making it the largest franchisee in the Outback system. It then closed underperforming restaurants as their economics required or their leases expired, and operated 74 restaurants at the end of fiscal 2025.

Ownership and Governance

Holdings is wholly owned by non-Debtor Cerca Trova Restaurant Group, Inc. ("CT RG"), which is owned by the T-Bird Restaurant Group Trust, an H.I.G. affiliate. Holdings owns all of the equity of Debtors Out West Restaurant Group, Inc. ("OWRG"), CTS Inc. and CT Southwest. CTS LP is owned approximately 59.4% by CTS Inc., as general partner, and approximately 40.6% by Holdings.

The equity of Holdings and of each other Debtor is pledged to Goldman Sachs Specialty Lending Group, L.P., the administrative and collateral agent under the Prepetition Credit Agreement (the "Prepetition Agent"). Events of default had occurred under the facility, and on April 28, 2020 the Prepetition Agent exercised its rights over the pledged equity. Acting as proxy holder, it reconstituted the boards of Holdings, OWRG and CTS Inc. and the managers of CT Southwest. It kept Chief Executive Officer David Goronkin and appointed two new members:

• John Bittner, a Senior Managing Director at Accordion Partners, LLC with more than 25 years of restructuring advisory experience.
• David Barr, founder and chair of PMTD Restaurants, a KFC and Taco Bell franchisee.

The same three individuals make up those boards today. The Prepetition Agent has voted the pledged equity at the Debtors' annual stockholder meetings since then, most recently on July 29, 2025.

Mr. Goronkin has been CEO of each Debtor since October 2019. He resigned from the board of non-Debtor CT RG effective October 15, 2026. Under his employment agreement dated June 18, 2024, he is eligible for a bonus on a change in control of the Company, including a sale of substantially all of its assets. Under a separate letter agreement of the same date, the Prepetition Agent and the lenders under the Prepetition Credit Agreement (the "Prepetition Lenders") agreed to fund or pay amounts owing on that bonus, including if the employment agreement is not assumed in a Chapter 11 case. Separately, in July 2026, OWRG entered into retention letter agreements with certain officers and made retention payments under them. Any request to pay these obligations from the estates would be made by separate motion.

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Operations Overview

Restaurant Operations

The Restaurants are casual-dining restaurants with a steak-focused menu and a full bar. Revenue comes from dine-in, take-out and third-party delivery. They serve approximately 7.9 million guests a year at an average ticket of approximately $37. Alcoholic beverages account for approximately 8.7% of sales, and the Debtors hold a liquor license for each Restaurant.

Managing Partners and Workforce

The partnership model's management structure remains central to operations. Each Restaurant is generally led by a managing partner (each, a "Managing Partner"), and joint venture partners ("JVPs") oversee groups of Restaurants. Both are at-will employees whose incentive pay is tied to their Restaurants' profits:

• Managing Partners receive periodic bonuses based on their Restaurants' distributable cash flow. These averaged approximately $19,400 over the twelve months ended with fiscal period 9 of 2026.
• JVPs receive monthly payments equal to 1.5% of the EBITDAR of the Restaurants they oversee.

There are currently 59 Managing Partners.

As of the Petition Date, the Debtors employ approximately 3,669 people: approximately 3,489 hourly and 180 salaried. Approximately 30 of them work in corporate and administrative roles. The workforce is employed by three Debtors:

• OWRG employs approximately 278 people, including corporate staff, Managing Partners, JVPs and salaried restaurant managers.
• CTS LP employs approximately 1,836 hourly employees in California.
• CT Southwest employs approximately 1,555 hourly employees outside California.

No employee is represented by a union or covered by a collective bargaining agreement.

Leases and Supply

The Debtors lease the premises for all of the Restaurants. They own no real property other than improvements at certain Restaurants built on leased land. Many of the leases are triple net leases under which the Debtors pay real property taxes on the premises directly to the taxing authorities. Bloomin' affiliates are the landlord or sublandlord for 14 of the Restaurants.

The Debtors buy substantially all of their food and supplies from Franchisor-approved suppliers. Kenneth O. Lester Company, Inc. d/b/a PFG Customized Distribution ("PFG") is the sole broadline food and supply distributor and delivers approximately twice a week. C.H. Robinson Worldwide, Inc. buys fresh produce as the Debtors' agent and arranges delivery through regional distributors.

Franchise Relationship

The Restaurants operate under the Master Franchise Agreement among the Franchisor and non-Debtor CT RG, as developer, together with a restaurant addendum for each Restaurant. Development rights are also governed by an amended and restated development agreement dated January 9, 2015 and a development rights rider dated April 25, 2017. The Debtors pay the Franchisor a royalty of 3.5% of sales for the California Restaurants and 5.0% elsewhere, plus national and local marketing contributions. Advertising fees have been reduced to 2.25% of gross sales since December 31, 2023. In total, franchise fees equal approximately 6.3% of sales. The franchise agreements also impose remodeling and development obligations.

The Restaurants participate in the system-wide gift card program run by the Franchisor. Most gift cards redeemed at the Restaurants are sold elsewhere in the system, so the monthly settlements have historically produced net payments to the Debtors. Those payments totaled approximately $16.4 million over the twelve months ended September 2026.

Bloomin' and its affiliates have several roles in the case. The Franchisor is the Debtors' franchisor, a significant creditor, the proposed stalking horse purchaser and the proposed DIP lender. Bloomin' affiliates are landlords or sublandlords of certain Restaurants. Bloomin' is also a co-defendant with certain Debtors in pending putative class actions.

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Prepetition Obligations

Prepetition Credit Agreement

The Debtors' principal funded debt is under the Prepetition Credit Agreement. The borrowers are Holdings, OWRG, CT Southwest, CTS Inc. and CTS LP, and CT RG is guarantor. The current Prepetition Lenders are Goldman Sachs Specialty Lending Group, L.P. and its affiliates, funds managed by Comvest Partners, and GSP Steak Finance, LLC. The facility originally provided up to $135.0 million of senior secured commitments: a $120.0 million term loan, a $7.5 million revolver, and a $7.5 million delayed-draw term loan that was never drawn. Term loan proceeds funded the 2017 Southwest acquisition, refinanced the first- and second-lien debt incurred in the 2015 H.I.G. acquisition, and paid related fees and expenses.

• Amount outstanding — Approximately $122.5 million of term loans and $6.5 million of revolving loans. On top of that sits approximately $190.9 million of accrued and capitalized interest, fees and other obligations (the "Lender Accrued Obligations"), for a total of approximately $319.9 million (the "Prepetition Secured Obligations"). Term loan principal is above the original $120.0 million because it includes amounts capitalized on or before November 30, 2020.
• Rate — Base rate (currently 7.00%) plus 8.25%, plus 0.50% paid-in-kind interest and 2.00% default interest.
• Maturity — April 25, 2022. The loans were not repaid or refinanced at maturity.
• Collateral — Liens on substantially all of the Debtors' assets. These include pledges of each Debtor's equity (including CT RG's pledge of the Holdings equity), deposit account control agreements over the principal bank accounts, and leasehold deeds of trust on certain restaurant leases.
• Franchisor consent — Under a Franchisor Consent and Agreement dated April 25, 2017, the Franchisor consented to the Prepetition Agent's liens and agreed to certain notice, cure and standstill arrangements.

Forbearance Agreements

The Prepetition Credit Agreement has been amended several times, including a waiver, consent and first amendment dated September 25, 2018 and a third amendment dated April 7, 2021. Since the pandemic, the Debtors have operated under two rounds of forbearance:

• 2020 forbearance — Under the Forbearance Agreement and Second Amendment dated December 27, 2020, the Prepetition Lenders agreed not to exercise remedies through December 31, 2023, including for the loans' maturity. They also agreed that accrued interest would be capitalized rather than paid in cash. In exchange, the Debtors accepted new minimum liquidity and minimum EBITDA covenants and agreed to apply excess cash to the Prepetition Secured Obligations.
• 2023 extension — The Debtors missed the minimum EBITDA covenant in 2023. The parties then entered into Amendment No. 1 to the 2020 forbearance agreement (November 20, 2023) and the Forbearance Agreement and Fourth Amendment (December 31, 2023). Together these extended the forbearance period to December 27, 2026 and reset the minimum EBITDA covenant to $15.0 million.

Franchisor Obligations

In December 2020, the Debtors and the Franchisor entered into a Holistic Resolution Agreement and a Deferred Payment Agreement. Under the original Holistic Resolution Agreement, the Franchisor:

• waived approximately $5.7 million of royalty and marketing fees;
• deferred approximately $18.1 million of unpaid fees and other obligations;
• accepted approximately $3.6 million of rent in installments; and
• allowed the Debtors to close certain restaurants.

Both agreements were amended and restated effective December 31, 2023. The amendments reset the deferred balance at approximately $13.9 million and extended its term to December 27, 2026. As of the Petition Date, approximately $13.9 million of royalties, marketing fees and other obligations remains deferred (the "Deferred Franchisor Obligations"). The deferred amount bears no interest and becomes due on a sale of the Company or termination of the Holistic Resolution Agreement. Under the Holistic Resolution Agreement, the proceeds of a sale of the Company are shared between the Prepetition Lenders and the Franchisor under an agreed waterfall.

Unsecured and Subordinated Obligations

• H.I.G. subordinated note — A $5.0 million note issued to an H.I.G. affiliate in 2017. It matured on October 25, 2022 and remains outstanding. With approximately $1.8 million of accrued interest, the total is approximately $6.8 million.
• H.I.G. management fees — Approximately $2.1 million accrued and unpaid. The Prepetition Credit Agreement documents restrict their payment. By H.I.G.'s estimate, the amount covers fees accrued through April 28, 2020, the date the Prepetition Agent exercised its rights over the pledged equity. H.I.G. has not calculated fees for any later period.
• MP Buyout Obligations — Before the current program, Managing Partners held equity in the limited partnerships that owned their Restaurants and served under five-year contracts. When those contracts expired, the Debtors issued promissory notes for those interests, each payable in five annual installments with interest (the "MP Buyout Obligations"). As of November 1, 2026 these totaled approximately $522,000, payable through January 2029: approximately $168,000 to former Managing Partners and approximately $354,000 to current Managing Partners and JVPs.
• Trade and landlord payables — Approximately $5.9 million owed to approximately 240 vendors and landlords as of October 29, 2026.
• Other claims — Claims from pending litigation, and obligations to employees, landlords, taxing authorities and other creditors.

The Debtors estimate their unsecured claims at approximately $27 million. That figure excludes the Deferred Franchisor Obligations and other amounts owed to the Franchisor or its affiliates, any deficiency claim of the Prepetition Lenders, and contingent, unliquidated or disputed claims.

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Events Leading to Bankruptcy

Expansion Debt and Early Covenant Defaults

The Company took on debt to finance its expansion. The Declaration attributes the Company's failure to achieve the earnings growth that debt assumed to sector-wide headwinds. Like the rest of the casual dining segment, the Company faced year-over-year declines in guest traffic, while its labor costs rose sharply, driven largely by successive minimum wage increases in California. From the fiscal quarter ended December 30, 2018, the Debtors could not meet the financial covenants under the Prepetition Credit Agreement. Starting in June 2019, interest accrued at the default rate.

COVID-19 Pandemic

Beginning in March 2020, government orders closed or restricted the Debtors' dining rooms. Revenue fell approximately 35% in fiscal 2020, from approximately $336.0 million to approximately $217.0 million. The Debtors could not make scheduled principal and interest payments. In April 2020, the Prepetition Agent exercised its rights over the pledged equity and reconstituted the boards.

In December 2020, the Debtors, the Prepetition Lenders and the Franchisor reached the forbearance and fee-deferral arrangements described above. According to the Debtors, that support let them keep the Restaurants open and their employees working through the pandemic. The Franchisor is now the proposed stalking horse purchaser and DIP lender in these cases, and the Prepetition Lenders, whose agent has voted the Debtors' pledged equity since April 2020, are consenting to the use of their cash collateral and to being primed by the Franchisor's DIP facility.

Maturity Default and Capitalized Interest

Sales recovered in 2021 and 2022. However, the loans were neither repaid nor refinanced when they matured in April 2022. The Declaration attributes this to the pandemic's damage to the capital structure, despite continued strength at most locations. Since then the Debtors have operated under the forbearance agreements, with interest accruing at the default rate and being added to the loan balance.

Principal has stayed at approximately $129.0 million. The Prepetition Secured Obligations, however, grew from approximately $140.0 million in November 2020 to their current approximately $319.9 million. The Lender Accrued Obligations rose from approximately $11.0 million in November 2020 to approximately $172.5 million as of June 28, 2026.

Operating Pressures, 2023–2026

The Declaration describes casual dining as highly competitive and sensitive to consumer discretionary spending. It attributes the Debtors' recent decline to the following pressures:

• Guest traffic — Traffic fell approximately 3.1% in fiscal 2023, 3.0% in fiscal 2024 and 2.7% in fiscal 2025, and approximately 3.6% more in the first half of fiscal 2026. Menu price increases of approximately 7.8%, 5.0% and 3.7% in fiscal 2023 through 2025 no longer made up for lost traffic and changes in menu mix. Same-store sales fell in fiscal 2024 and 2025.
• Labor — Approximately 54% of employees work in California, where successive state and local minimum wage increases raised hourly wage rates. From 2019 to 2022 alone, average back-of-house and front-of-house wage rates rose approximately 26% and 23%, respectively. Restaurant labor costs climbed from approximately 30.7% of sales in fiscal 2019 to approximately 34.4% for the twelve months ended August 23, 2026.
• Food and commodities — Beef is the Debtors' largest food cost. Commodity inflation ran approximately 15% to 20% in 2022 and approximately 4% to 5% a year since then.
• Other operating costs — Insurance, technology, maintenance and other restaurant operating costs rose from approximately $33.4 million in fiscal 2019 to approximately $47.4 million in fiscal 2025. Rent and franchise fees are fixed or tied to sales, so lower traffic compressed margins further.

Restaurant-level EBITDA margin fell from approximately 8.8% in fiscal 2023 to approximately 5.0% for the twelve months ended August 23, 2026. Consolidated adjusted EBITDA as calculated under the Prepetition Credit Agreement ("covenant EBITDA") fell from approximately $22.1 million in fiscal 2023 to approximately $8.4 million in fiscal 2025. For the twelve months ended August 23, 2026, it was approximately $6.3 million.

Covenant Defaults and Notice of Default

The Debtors missed the $15.0 million minimum EBITDA covenant for the fiscal quarters ended in June, September and December 2025. Interest expense rose from approximately $21.0 million in fiscal 2019 to approximately $45.9 million in fiscal 2025, more than five times covenant EBITDA for that year. On April 14, 2026, the Prepetition Agent delivered a notice of events of default and reservation of rights. It has not terminated the forbearance period. However, the notice left the forbearance open to termination at the Prepetition Lenders' election, and the period otherwise expires on December 27, 2026.

California Wage-and-Hour Litigation

The Debtors have faced recurring wage-and-hour litigation under the California Labor Code and the Private Attorneys General Act of 2004. Past costs include a $3.5 million class settlement in 2015, approximately $1.3 million of individual settlements from 2020 to 2026, and substantial defense costs. The Debtors dispute the allegations in the pending matters:

• Cano Action — Former employees filed two putative class and representative actions in Los Angeles County Superior Court in 2019 and 2020 (Rejniak and Cano, both against Cerca Trova Restaurant Concepts, Inc.). The cases were later consolidated (the "Cano Action"). In 2024 the parties agreed to settle without any admission of liability: the Debtors would pay $1.6 million plus the employer's share of payroll taxes, resolving the claims of approximately 18,900 current and former employees. The court granted final approval on August 13, 2026. Payment comes due after entry of judgment and expiration of the time to appeal.
• Garcia and Hernandez — Two new putative wage-and-hour class actions were filed in the same court in summer 2026: Garcia v. Cerca Trova Steakhouse, L.P. (June 29, 2026) and Hernandez v. Out West Restaurant Group, Inc. (August 31, 2026). Hernandez asserts claims for all hourly employees who worked for the defendant Debtors in California during the four years before the complaint was filed.
• Other class actions — The Debtors are defendants in three other putative class actions relating to accessibility, menu representations and gift cards. Bloomin' is a co-defendant in two of them.

Liquidity

Cash in the Debtors' bank accounts fell from approximately $9.7 million at the end of fiscal 2023 to approximately $5.4 million at the end of fiscal 2025. It was approximately $5.7 million as of October 25, 2026. The Debtors projected approximately $3.4 million of cash at the Petition Date. Against that, weekly payroll and benefits run approximately $2.5 million and weekly food and liquor purchases approximately $1.5 million. The revolver is fully drawn and the Debtors have no other source of financing.

To preserve cash, the Debtors cut capital expenditures from approximately $4.5 million in the first half of fiscal 2025 to approximately $1.9 million in the first half of fiscal 2026. Many Restaurants now need significant maintenance, repair and remodeling, and the Declaration estimates the deferred investment at approximately $21.4 million. Two obligations are now approaching: the Cano Action settlement payment and the December 2026 expiration of the forbearance period. According to the Debtors, they cannot meet these obligations without a sale while continuing to operate the Restaurants.

2026 Restaurant Closures

Ahead of a sale, the Debtors closed restaurants they describe as underperforming. They closed the Brea and Pittsburg, California locations in March 2026 and Westminster, California in June 2026. Between October 11 and October 25, 2026, they closed ten more restaurants in Arizona, California, Colorado and Nevada that are not part of the proposed sale (the "Closed Restaurants"). They terminated the related restaurant addenda with the Franchisor's consent and surrendered the premises to the landlords effective October 30, 2026. Approximately 400 employees of the Closed Restaurants received final wages, and approximately 25 management employees were offered severance under separation and release agreements.

Sale Efforts

The Company has tried to sell the business four times since 2018. Two earlier processes produced no transaction:

• 2018 — A process run with North Point Advisors.
• 2022 — A process run with Piper Sandler & Co., which drew several offers. The Declaration characterizes none of them as economically viable.

In 2025, the Company negotiated an out-of-court sale of substantially all of its assets with a prospective purchaser. That party delivered letters of intent in February, July and October 2025. The last one contemplated a price of approximately $52.0 million, including assumed liabilities. The purchaser's exclusivity was extended through December 14, 2025, but no definitive agreement was reached; the Declaration attributes this to the continued decline in the Company's financial performance.

A Bloomin' affiliate delivered a letter of interest on May 22, 2026. On June 29, 2026, the Debtors hired Brookwood Associates, L.L.C. ("Brookwood") as investment banker. Beginning the week of August 17, 2026, Brookwood contacted 177 potential buyers (115 strategic parties and 62 financial sponsors). Twenty signed confidentiality agreements and received data room access. By September 17, 2026, the Debtors had three letters of intent, two from third parties and one from Bloomin'. Bloomin' revised its letter on September 25, 2026. The Declaration describes the ensuing negotiations as arm's-length and credits Brookwood and the Debtors with obtaining significant improvements to Bloomin's proposal; the parties signed a revised letter of intent on October 2, 2026.

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Chapter 11 Filing

The Debtors filed to complete a court-supervised, going-concern sale of substantially all of their assets, with the Franchisor as stalking horse bidder. The Prepetition Secured Obligations of approximately $319.9 million far exceed the $26.3 million stalking horse cash price, and the Debtors have no material unencumbered assets. They plan to fund the cases with cash on hand, operating cash flow, cash collateral and, if needed, advances under a DIP facility from the Franchisor.

Stalking Horse APA

The Debtors and the Franchisor signed an asset purchase agreement dated November 1, 2026 (the "Stalking Horse APA"). Under it, the Franchisor would acquire substantially all of the Debtors' restaurant assets, subject to higher or otherwise better offers. The bid has no financing contingency, and the Closed Restaurants are excluded.

• Cash price — $26.3 million. The Franchisor would pay up to $6.1 million more in cash to the extent certain specified liabilities assumed at closing come in below that amount. The cash price includes $1.3 million that the Debtors must hold in a segregated account and use only for accrued but unpaid employee severance, bonuses, paid time off and other compensation through closing.
• Assumed liabilities and cures — The Franchisor would assume certain liabilities, including gift card, loyalty program and promotion obligations. It would also pay cure costs for assumed contracts and leases, within limits. For restaurant leases it would pay only accrued and unpaid property taxes and percentage rent, capped at $1.0 million and $600,000, respectively, in the aggregate.
• Franchisor release — At closing, the Franchisor would waive any cure costs owed to it. It would also release the Debtors from all claims under the franchise agreements, the Holistic Resolution Agreement and the Deferred Payment Agreement, including the Deferred Franchisor Obligations.
• Employees — The Franchisor must offer employment to substantially all restaurant-level employees, subject to its normal hiring practices. It would pay the MP Buyout Obligations owed to the Managing Partners and JVPs listed on a schedule to the agreement whom it hires.
• Liquor licenses — If liquor license approvals are not in place by closing, interim management agreements at the Franchisor's expense would let it run the affected Restaurants for up to 120 days after closing, where applicable law permits.
• Deposit and bid protections — The Franchisor would post a $2,630,000 deposit within two business days after the later of entry of the bidding procedures order and execution of the Stalking Horse APA. A $790,000 break-up fee (the "Break-Up Fee") is payable only if the Debtors close an alternative transaction, and only from that deal's cash proceeds. There is no expense reimbursement. A competing bid must beat the stalking horse bid by at least the Break-Up Fee plus $250,000. If more than one qualified bid is received, an auction would be held.

The price is lower than the values discussed in 2025. The Declaration attributes the gap to continued deterioration in performance. Covenant EBITDA was approximately $12.4 million for the twelve months ended September 28, 2025, the end of the last fiscal quarter before the October 2025 letter of intent. It had fallen to approximately $6.3 million by the twelve months ended August 23, 2026, a decline of nearly one-half.

DIP Facility

The Franchisor would provide a revolving DIP facility of up to $5.5 million (the "DIP Facility"), which the Debtors describe as a liquidity backstop for the sale process. The Debtors and Brookwood concluded that seeking third-party DIP financing would not be productive. With no equity cushion or unencumbered value, any outside lender requiring a senior lien would have to prime the Prepetition Lenders without their consent. According to the Debtors, the Prepetition Lenders declined to provide postpetition financing and consented to being primed only by the DIP Facility.

• Pricing — No interest. The only fee is a $50,000 commitment fee, plus reimbursement of reasonable and documented out-of-pocket expenses.
• Availability — Up to $2.5 million on entry of the interim order. The balance becomes available on entry of both the final order and the bidding procedures order. Advances are available only to the extent projected cash would otherwise fall below a $2.0 million minimum liquidity amount. The Franchisor need not advance funds if it is no longer the stalking horse, successful or back-up bidder.
• Security and priority — Liens on substantially all assets that, with the Prepetition Agent's consent, prime the liens securing the Prepetition Secured Obligations. These liens rank behind only a carve-out for professional fees and certain other expenses (the "Carve-Out") and certain permitted prior liens. The DIP claim would be a superpriority administrative claim, junior only to the Carve-Out and, if payable, the Break-Up Fee. Until the final order, DIP liens do not reach avoidance actions or their proceeds.
• Repayment through the sale — Amounts outstanding at closing would be credited dollar-for-dollar against the stalking horse cash price. The Franchisor may credit bid those amounts at any auction.
• Projected use — The nine-week cash flow budget (the "Budget") projects that, without DIP advances, cash would fall below the $2.0 million minimum in the week ending November 20, 2026, before the final DIP hearing. It would turn negative by approximately $0.8 million by the week ending November 27, 2026. The Budget assumes a $2.5 million interim advance in the first week and approximately $2.0 million more in the week of November 23, 2026, using approximately $4.5 million of the facility.
• Early-case spending — Spending is concentrated in the first weeks of the case. It includes approximately $5.2 million to critical vendors, shippers, maintenance providers and section 503(b)(9) claimants, and approximately $550,000 to produce sellers with claims under the Perishable Agricultural Commodities Act (PACA). It also covers approximately $1.7 million of insurance premiums, the utility deposit, and weekly funding of a professional-fee reserve.

Cash Collateral and Adequate Protection

Substantially all of the Debtors' cash is subject to the Prepetition Agent's liens. The Debtors would use it as cash collateral with the Prepetition Lenders' consent, on these terms:

• Adequate protection — Replacement liens and section 507(b) superpriority claims, each junior to the Carve-Out, the Break-Up Fee and the DIP liens and claims. The lenders' reasonable, documented counsel fees would be paid only as provided in the Budget, and are subject to recharacterization as principal if the lenders are found to be undersecured. The lenders also receive financial reporting. Until the final order, adequate protection liens and claims do not reach avoidance actions.
• Budget and Carve-Out — The Debtors must operate within the Budget, subject to permitted variances, and deliver weekly variance reports. The Carve-Out is funded weekly into a segregated account, reaching approximately $2.4 million through the expected sale closing.
• Stipulations and releases — The Debtors would stipulate to the amount, validity and priority of the Prepetition Secured Obligations and the related liens. Parties in interest would have 75 days after entry of the interim order to challenge these stipulations. The Debtors will ask the Court to shorten that period in the final order so it ends at the sale hearing. The Debtors would also release claims against the Prepetition Agent, the Prepetition Lenders and the Franchisor as DIP lender, subject (as to the estates) to the same challenge rights.
• Waivers — Subject to the final order, the Debtors would waive their section 506(c) surcharge rights, the section 552(b) "equities of the case" exception and the doctrine of marshaling.
• Franchise fees — The Budget provides for continued payment of royalties, advertising and marketing fees and other franchise fees to the Franchisor. This includes prepetition amounts, capped at $1.5 million until the final order and excluding the Deferred Franchisor Obligations and other deferred amounts. As a condition of its continued forbearance under the franchise agreements and the Stalking Horse APA, the Franchisor requires the Debtors to stay current on all franchise fees through closing.

Sale Milestones

The Debtors filed their bidding procedures and sale motion alongside the petitions and asked the Court to hear the bidding procedures on shortened notice. The DIP milestones require the Debtors to file the sale motion within two days and obtain a bidding procedures order within 14 days after the Petition Date. The proposed sale dates match the remaining DIP milestones, some of which can be extended with the Prepetition Agent's written consent:

• December 8, 2026 – Bid deadline (proposed)
• December 11, 2026 – Auction, if necessary (proposed)
• December 15, 2026 – Sale hearing (proposed)
• December 17, 2026 – Outside date for entry of the sale order (proposed DIP milestone)
• January 4, 2027 – Outside date for sale closing (proposed DIP milestone)

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First Day Motions

• Wages — Authority to pay prepetition wages, tips and other compensation, honor benefit programs and remit withholdings and payroll taxes. Payments are capped at $17,150 per employee. The cap excludes paid time off that state law requires on termination of a non-insider, and excludes tips, which are not estate property. The last prepetition payroll was paid on October 23, 2026, so substantially all pay for the October 19 to November 1 pay period, due November 6, 2026, was earned before the filing.
  • Unpaid compensation — Approximately $3.4 million of wages and salaries, including approximately $225,000 of payroll checks that had not cleared. Also owed are approximately $630,000 of tips collected but not yet passed to employees and approximately $145,000 of earned Managing Partner incentive payments. Approximately $37,000 of withholdings had not been remitted, and approximately $350,000 of employer payroll taxes was owing. Employees had also accrued approximately $1.1 million of unused vacation.
  • Severance — Separation agreements offered to approximately 25 non-insider managers of the Closed Restaurants provide for lump-sum severance totaling approximately $204,000. Two payments totaling approximately $21,700 were made before the filing, and approximately $182,000 remains payable. No individual payment exceeds approximately $13,340. Payments are capped at $75,000 interim and $225,000 final.
  • Bonus programs — Continuation of two programs. The corporate bonus program covers approximately 20 non-insider employees; fiscal 2026 bonuses are estimated at approximately $50,000, payable only under the final order and capped at $60,000. The quarterly manager bonus program covers approximately 90 managers in Arizona, Colorado, Nevada and New Mexico, each eligible for up to $3,375 per quarter; fourth-quarter fiscal 2026 bonuses are estimated at approximately $130,000, with a $150,000 final-order cap.
  • Exclusions — No authority is sought to pay the MP Buyout Obligations or any insider bonus, retention, incentive or severance obligation.
• Taxes — Authority to pay approximately $3.7 million of prepetition taxes and fees. This is mainly approximately $2.7 million of sales and use taxes (about five weeks' worth) and approximately $0.9 million of property taxes. Approximately $2.0 million comes due before the final hearing. Assessments from current or recent audits would be paid only under the final order; these include sales and use tax audits by California and the Colorado cities of Thornton and Louisville, and property tax audits by Orange County, California. No relief is sought for prepetition property taxes on the Closed Restaurant premises, or for taxes owed by non-Debtor CT RG unless a Debtor is liable for them.
• Cash management — Continuation of a centralized system of 12 bank accounts: 11 at Wells Fargo and one at JPMorgan, four of them dormant. Restaurant receipts are swept daily into an OWRG operating account at Wells Fargo, which funds a payables account and three payroll accounts on a zero-balance basis. Wells Fargo balances were approximately $3.6 million as of October 30, 2026. Intercompany transactions have not historically been recorded entity by entity. Going forward they will be allocated monthly, and the Debtors seek administrative expense status for postpetition intercompany claims. The corporate card program ($50,000 credit limit) would continue. The Debtors seek no authority to pay any non-Debtor affiliate or insider, including CT RG and H.I.G., on any obligation, including management fees.
• Utilities — A $372,900 adequate assurance deposit, about two weeks of average utility cost excluding the Closed Restaurants, placed in a segregated, interest-bearing account within 20 days after the interim order. Utilities for the Restaurants and corporate office average approximately $808,000 a month. The Debtors would keep paying their utility bill-payment intermediary, ENGIE Insight Services Inc. Its prepetition fees, estimated at approximately $2,500, are capped at $5,000. The Debtors would not pay the approximately $400,000 of other prepetition utility charges. Approximately $311,000 of that was billed by Budderfly, Inc., which runs energy-efficiency equipment at 54 Restaurants and holds the utility accounts there in its own name. The Debtors ask the Court to bar Budderfly from cutting off service over unpaid prepetition charges.
• Insurance — Authority to maintain approximately 15 policies, placed through broker Marsh & McLennan Agency, with a 2025–2026 annual premium of approximately $6.2 million. Before filing, the Debtors extended their directors' and officers', employment practices, fiduciary and crime policies for 90 days, adding a six-year extended reporting period on all but the crime policy. The remaining policies expire December 1, 2026. The Debtors plan to extend them postpetition at an estimated premium of approximately $1.7 million, financing the premiums if needed. Prepetition obligations total approximately $250,000, mainly a potential workers' compensation audit adjustment. Payment is capped at $50,000 interim and $300,000 final.
• Customer programs — Authority to honor gift cards, promotions and the Dine Rewards loyalty program (approximately 235,000 members). Prepetition cash payments are capped at $50,000 interim and $100,000 in the aggregate. Programs could be changed or ended on 14 days' notice to the U.S. Trustee and any committee. As of October 2026, gift cards sold by the Debtors with approximately $7.6 million of face value remained unredeemed; approximately $1.2 million of that was recorded as an accrued liability. The Debtors expect to be owed approximately $1.1 million on prepetition gift card settlements.
• Critical vendors — Authority to pay prepetition trade claims, estimated at approximately $5.7 million at the Petition Date. Of that, approximately $4.0 million is owed to PFG, approximately $550,000 relates to produce bought through C.H. Robinson (potential PACA claims), and approximately $279,000 is owed to about 42 beer, wine and spirits distributors. Approximately 66 vendors are designated critical and are owed approximately $4.75 million, including PFG. Approximately $4.76 million of the $5.7 million of trade claims are estimated to have section 503(b)(9) priority. Shippers (approximately $19,000) and maintenance providers (approximately $365,000) may assert possessory or mechanics' liens. Payment is conditioned on the vendor continuing to supply on customary trade terms.
• Lease rejection — Rejection of the Closed Restaurants' leases effective as of the Petition Date (or the later surrender date), and abandonment of any personal property left at the premises. The Declaration describes these locations as having operated at a loss or at margins that did not justify their occupancy costs. Aggregate base rent is approximately $164,000 a month (approximately $2.0 million a year), plus common area maintenance, real property taxes, insurance and other charges. Holdings guarantees the leases in Tucson and Mesa, Arizona; Colorado Springs and Highlands Ranch, Colorado; and Reno, Nevada. Bloomin' guarantees the Aurora, Colorado lease, where a Bloomin' affiliate is the landlord. The Franchisor consented to the surrender and rejection.