A major restaurant is coming out of bankruptcy

Photo byCanva

Red Lobster, the seafood chain known for its endless shrimp and nautical decor, is making a major comeback after its recent bankruptcy. The restaurant has confirmed a significant change in ownership that promises to reshape its future.

The new owners are RL Purchaser LLC, backed by Fortress Credit Corporation. This group stepped in as a “stalking horse bidder,” which means they were the first to make a bid and set the bar for the sale. When Red Lobster filed for bankruptcy a couple of months ago, they had planned an auction for July 23. However, the auction was scrapped because no other bidders showed up by the deadline of July 18. This left RL Purchaser as the automatic new owner.

Red Lobster’s bankruptcy filing revealed several underlying issues: heavy debt, an overextended restaurant footprint, and a tough economic environment. The all-you-can-eat shrimp promotion, although popular, ended up being a financial burden. The chain reported a $11 million loss in the third fiscal quarter of the previous year, largely attributed to that deal.

Attorney Jeffrey Dutson, representing Red Lobster, explained at a July hearing that the aim was to “maintain operational continuity” and simplify the sale process, avoiding the complications of a traditional asset sale. RL Purchaser’s bid of $376 million will help Red Lobster restructure and address these financial strains.

With new ownership, Red Lobster is set to undergo some significant changes. The new entity, RL Purchaser, has a track record of buying and revamping struggling companies, including Vice Media and Alamo Drafthouse. This new chapter aims to streamline operations and tackle the issues that led to the chain’s financial struggles.

The asset sale will be reviewed in a hearing on July 29, which will determine if the deal goes through as planned. Red Lobster’s CEO, Jonathan Tibus, has hinted at a major overhaul to improve the chain’s performance and adapt to the current market conditions.

As Red Lobster looks to turn a new leaf, seafood lovers and industry watchers alike will be keeping an eye on how the chain navigates this transition and what it means for its future. Stay tuned for more updates as the chain gets back on its feet.