Franchise Group Creditors Move to Sue Over Pre-Bankruptcy Action

Bankrupt brand manager Franchise Group Inc.'s unsecured creditors want court permission to sue over what they say were “illegal” dividends the company issued in the aftermath of a $2.6 billion take-private deal.

Dividends that Franchise Group’s operating companies paid to its holding companies to service debt incurred in the 2023 transaction, and other debt guarantees, are fraudulent transfers that can be clawed back, a committee representing unsecured creditors said in a motion filed March 28 in the US Bankruptcy Court for the District of Delaware.

Unsecured creditors want to step into the shoes of the company to try to recover ...