The Story of Foxtrot: A Messy Private Restructuring Highlighting Successor Liability Questions
Really interesting story in the corporate bankruptcy/restructuring world on the private side. The most comprehensive coverage is in a write up by MotherJones which I can't link here. They're not shy with their perspective on PE as a whole, but their article is the most complete versus the bits and pieces coverage from most sites.
[https://www.cbsnews.com/chicago/news/foxtrot-market-and-doms-kitchen-file-for-bankruptcy/](https://www.cbsnews.com/chicago/news/foxtrot-market-and-doms-kitchen-file-for-bankruptcy/)
[https://chicago.eater.com/2024/5/16/24157698/foxtrot-bankruptcy-auction-comeback-outfox](https://chicago.eater.com/2024/5/16/24157698/foxtrot-bankruptcy-auction-comeback-outfox)
In April 2024 - Foxtrot, an upscale convenience/cafe/wine bar chain announced they were immediately ceasing operations.
Shortly after - a foreclosure sale was announced by JPM, a secured creditor, where they'd be selling some pledged collateral they exercised their rights to. On the day of the auction, held virtually - it was stated a deal had already been made to sell the assets to Further Point for $2.2M. A few days later - Foxtrot filed Chapter 7.
Private equity firm Further Point was an existing investor in Foxtrot - and less than a month later - the founder and original CEO Mike Lavitola announced they would relaunch.
Lavitola had been CEO until a year prior to them ceasing operations and had remained as a non-exec chairman.
By September 2024 - they reopened one of their original stores. Same name, original founder/CEO, mostly same vendors (per CEO's comments), and at least one same investor (Further Point). They've since reopened 10 of their prior stores.
Lawsuits have been filed obviously by mant vendors, employees, landlords, and Illinois DOL.
The main issues that'll be debated are:
a. If the new entity's similarities meet the criteria of being considered a continuation of the prior entity.
b. The related issue that since the assets of the new company were purchased in a foreclosure vs bankruptcy sale - there's more of a risk of claims that the buyer does not have protection from successor liability claims.
Fascinated to see if any details come out of the proceedings. Usually in these sort of fights I think we assume the company as having a massive resource advantage of legal teams and cash to throw at settlements. There could be less of a mismatch here as you're looking at a company that is trying to relaunch and despite having at least temporarily stripped their prior debts - probably isn't flush with cash ready to throw money at the problem. Their original backing PE firm is a one man shop by a former hedge fund analyst who is now serving as CFO - so probably also not the extensive ability to continue infusing cash for settlements and massive legal support.
As a fun note - some of their vendors that came back are already claiming Foxtrot is behind on payments and hasn't repaid any of the prior debts despite promising. Fool me once?
