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Steak ‘n Shake Inc. sued credit provider Fortress Investment Group LLC after the civil chain paid off debt to avoid bankruptcy, accusing Fortress of misusing confidential information to set up a takeover bid.
According to the Indiana-based milkshake-and-burger chain, backed by entrepreneur Sardar Biglari, Fortress has obtained sensitive information through negotiations for a possible real estate deal with Steak’s Shake. loans.
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After obtaining the loans, Fortress made it clear that it would not accept a negotiated repayment, saying that it would ‘force the company to repay the loans in full or to file for bankruptcy,’ according to the complaint.
Steak’s Shake paid off the loans in full on Friday, spending nearly $ 103 million to repay the debt and avoid a bankruptcy filing, the company said.
Steak’s Shake’s lawsuit, filed in Marion County Superior Court in Indiana on Friday, seeks to recover alleged losses due to Fortress’ actions.
Fortress did not immediately respond to a request for comment.
Steak’s Shake has struggled with the impact of the COVID-19 pandemic on the restaurant industry, moving from a table service model to self-service. To finance the transition and weather the pandemic, the company last year sold a portfolio of 15 properties.
Fortress was interested in purchasing the property and entered into a confidentiality agreement to obtain information about it. But the investment firm did not own real estate and began buying portions of Steak’s Shake’s loan from other investors, and according to the complaint, it ended up with more than 50%.
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Steak’s Shake said management “thought it was providing this information to a potential counterparty to a real estate transaction, not to a vulture investor”, who wanted the possibility by forcing the company into bankruptcy.
The company has been buying up parts of the loan for months at a discount from other investors. But with the loan maturity in March, Fortress said it would accept no less than full value, the lawsuit said. Lenders usually do not have to accept anything less than full repayment.
Steak’s Shake says the information provided to Fortress about the 15 properties allows the investment firm to extrapolate the total value of the company’s real estate and other details regarding the value of Steak’s Shake, which was useful. for anyone buying the company.
The company was prepared for a possible restructuring and appointed legal and financial advisers for a possible restructuring out of court or bankruptcy.
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Steak’s Shake has its origins in a hamburger standard founded in 1934. It went through a series of owners before Mr. Biglari took control in 2008 and has invested heavily in expanding the business throughout the US and abroad.