COURT: Twin Peaks Restaurants franchisee DMD Florida Restaurant Group files for Chapter 11, files motion to compel PNC Bank to unfreeze debtors’ accounts
Twin Peaks Restaurants franchisee DMD Development 2 LLC filed for Chapter 11 bankruptcy protection seeking access to cash collateral of prepetition lender Florida Restaurant Franchise Group IX LP.
Debtors DMD Development, DMD Restaurant Group C LLC and DMD Restaurant Group D LLC filed their bankruptcy petitions on Monday (6 January), reporting USD 500,001 to USD 1m of assets against USD 10m to USD 50m of liabilities. The company’s largest unsecured claim is held by Florida Restaurant Franchise Group, according to the petition. DMD C and DMD D each own and operate individual Twin Peaks restaurants.
The DMD debtors appear to be connected with DMD Ventures, an entity which participates in the EB-5 Immigrant Investor Program that allows immigrants to apply for permanent residence in the US if they make an investment in a US commercial enterprise and create or preserve 10 permanent full-time jobs for US workers. The debtors’ CEO Jack Flechner is a co-founder and co-CEO of DMD Ventures, and the company operates franchises of brands including Twin Peaks, Candlewood Suites, Go Mini’s, Papa Johns Pizza and a private jet management company.
DMD Development is the sole owner and member/managing member of DMD C and DMD D, and it is indebted to Florida Restaurant Franchise Group in the amount of about USD 12m, according to the cash collateral motion. The lender holds an alleged first priority lien on all of DMD Development’s assets.
The debtors argued that they will be forced to discontinue business operations without the use of cash collateral, and that they are willing to provide the lender with adequate protection of its interest in the cash collateral in the form of a replacement lien on all cash generated postpetition.
The debtors also filed a motion to compel PNC Bank to unfreeze their accounts, arguing that they may not be able to pay critical expenses — such as accounts payable, payroll and other employee obligations — in a timely manner or receive revenue from merchant processors without access to their funds. The debtors each maintained one checking account with PNC, while DMD C and DMD D each have three merchant credit card processing accounts that are used in the ordinary course of business to collect, transfer and disburse funds generated by business operations. Yesterday (7 January), the debtors’ manager was informed that several checks drawn from the bank accounts had been reversed and that the accounts were frozen, per the motion.
DMD’s counsel purportedly conferred with PNC’s general counsel, which informed the company that a debtor-in-possession (DIP) account must be opened or a court order entered in order to comply with the bank’s policies and protocols. The debtors claimed that PNC is no longer opening DIP accounts, and that they are in the process of opening DIP accounts with a different institution.
Judge Scott Grossman of the US Bankruptcy Court for the Southern District of Florida has not yet scheduled a hearing to consider the requested relief.