Existing owners were offered the opportunity to buy preferred shares, but the terms were not final and may have changed in a subsequent filing.

LUBBOCK, Texas — A bankruptcy reorganization plan filed by Lubbock-based Abuelo’s would cancel existing ownership interests without compensation while allowing those investors to put new money into the restaurant company through a future preferred-stock offering.

Those provisions appeared in the company’s March 2 Chapter 11 plan. They have not received final court approval, and Abuelo’s filed an amended plan and disclosure statement on July 10, according to the federal bankruptcy docket. The amended documents could revise the earlier ownership terms.

The bankruptcy case remains open in the Northern District of Texas under Judge Edward L. Morris. No confirmation order was listed on the public docket as of July 24.

Existing shares would be canceled

Under the March proposal, investors in Food Concepts International Holdings Inc., the parent company in Abuelo’s corporate structure, would receive no distribution for their existing ownership interests. Those interests would be canceled when the plan became effective.

That does not necessarily mean Abuelo’s restaurants would close. Chapter 11 generally allows a company to continue operating while it restructures debt and proposes a repayment plan. A plan becomes binding only after creditors receive required disclosures, eligible classes vote and the bankruptcy court determines that the proposal meets federal requirements, according to the Administrative Office of the U.S. Courts.

Canceling old equity is also different from taking away shares while leaving the company’s finances unchanged. In a reorganization, creditor claims generally take priority over ownership interests. Existing equity may therefore be eliminated when the company’s value is insufficient to satisfy its debts and preserve value for its owners.

Investors could buy new preferred shares

Although existing investors would receive nothing for their old stakes under the March plan, they would have an exclusive, nontransferable opportunity to participate in a new stock offering.

The offering contemplated two classes of preferred shares:

• Series A super-voting preferred stock: Each share would carry 120,000 votes, compared with one vote for a common share. It would also have economic and dividend rights equivalent to 40,000 common shares.
• Series B pay-in-kind preferred stock: These shares would have no voting rights but would pay an 8.5% annual dividend through the issuance of additional securities rather than cash. The dividend rate could increase after the third year, subject to a 12% ceiling.

Existing investors would not automatically receive either class. They would have to purchase the new securities on terms set through the rights offering. The March plan said additional subscription details would be provided in a later plan supplement.

Purchasing the super-voting stock would also carry a potential obligation beyond the share price. Each subscriber would have to indemnify guarantors of Abuelo’s bank debt for as much as $100,000 per Series A share.

That distinction is important: the proposal would eliminate the value of the investors’ existing holdings, then give them the right—but not the obligation—to make a separate investment carrying new terms and risks.

Bankruptcy lenders would become major owners

David Sharbutt and G. Randall Andrews provided $1.5 million in debtor-in-possession financing to help Abuelo’s continue operating during bankruptcy.

Under the March proposal, that financing would be converted into preferred stock instead of repaid entirely in cash. The first $1 million would become 50 Series A super-voting shares. The remaining $500,000 would become 10 Series B pay-in-kind shares.

Sharbutt and Andrews would also become the reorganized parent company’s initial directors. Additional directors and officers could later be appointed under the company’s bylaws.

Creditors would receive different treatment

The March plan proposed combining approximately $8.03 million owed to First Bank & Trust into one secured note. The new loan would run for 10 years at 7% interest and remain backed by the bank’s existing collateral.

Most general unsecured creditors would receive 10% of their approved claims. Payments would be spread across 20 quarterly installments without interest, amounting to a five-year repayment period.

Smaller unsecured claims of $2,500 or less would be treated differently. Those creditors would receive 20% of their approved claims within 90 days after the plan’s effective date.

The company would also be allowed to assume or reject leases and other contracts, subject to bankruptcy law and court approval. That process permits a reorganizing business to retain agreements it considers beneficial while seeking relief from certain burdensome obligations.

Abuelo’s continues operating

Abuelo’s and affiliated companies filed for Chapter 11 protection on Sept. 2, 2025. The chain operated 16 restaurants in seven states at the time of the filing, although it previously had about 40 locations.

The company attributed its financial problems to declining sales, higher operating costs, staffing difficulties and changes in customer behavior, according to Restaurant Business. Court filings initially placed both assets and liabilities between $10 million and $50 million.

Abuelo’s remained in operation during the case and reported improved financial results in early bankruptcy reports. Earlier reporting by Lubbock Lights said the company recorded about $2.5 million in operating income between the filing and early 2026.

Those operating results do not guarantee that the March plan—or its treatment of investors—will be approved.

The court extended the company’s exclusive period for soliciting acceptance of a plan on June 29. Abuelo’s then filed its amended Chapter 11 plan and a new disclosure statement July 10.

Until the amended documents are reviewed and the bankruptcy court enters a confirmation order, the cancellation of existing investments, the preferred-stock offering and the proposed creditor payments remain elements of a bankruptcy proposal rather than a completed restructuring.