GPS Hospitality is in talks to hand control of the company to creditors following multiple missed interest payments on its senior secured notes, said two sources familiar with the matter.

The privately-held fast food restaurant operator, one of the largest Burger King franchisees in the US, is eying an out-of-court deal to restructure its capital structure, said the sources and a third source familiar with the matter.

Bondholders are expected to equitize a significant portion of their debt and provide new money as part of the deal, one of the sources said. CEO Tom Garrett may continue to have an ongoing role with the company he founded in 2012, another of the sources said.

GPS Hospitality has been operating under an extended forbearance agreement with creditors after it missed its 15 August 2025 and 15 February 2026 interest payments on its senior secured notes, according to S&P Global Ratings. The ratings agency said in February that GPS has been struggling with poor operating results due to “geographic and brand challenges, along with a high interest burden.”

Last fall, GPS proposed a deal with creditors that would have raised new funds and allowed bondholders to exchange into new notes with a 2030 maturity along with receiving a substantial majority of the company’s equity, said two additional sources familiar with the matter. The company proposed raising USD 75m in first-out new money and exchanging its USD 400m senior secured notes swapping into USD 125m take-back second-out notes with a 200bps higher interest rate, according to S&P.

A group of creditors organized with Paul Weiss under a cooperation agreement back in 2024 amid declining performance of the restaurant operator, Debtwire reported at the time. Creditors later engaged Moelis as financial adviser and the company hired Houlihan Lokey and Paul Hastings, as reported.

Lord Abbett is among the biggest holders of GPS’s USD 400m 7% senior secured notes due 2028, according to filings. The notes, which are not widely traded, last traded in small volumes earlier this month at 48.6, according to MarketAxess.

GPS Hospitality operates more than 400 Burger King and Popeyes Louisiana Kitchen restaurants, according to its website. It previously operated Pizza Hut restaurants as well, but sold those locations.

The company, Paul Hastings, Moelis and Paul Weiss did not return requests for comment. Houlihan declined to comment.

Photo: Burger King