Red Lobster set to exit bankruptcy with new owners

Two months after filing for Chapter 11 bankruptcy, Red Lobster is on track to have a new owner.

After no other bidders came forward, an entity made up of its lenders will acquire the struggling seafood chain out of bankruptcy, pending court approval.

As the stalking horse bidder, RL Purchaser LLC a new group organized and controlled by New York-based Fortress Credit Corp. bid $375 million for the Orlando-based company’s remaining assets.

According to the Orlando Business Journal , the price consists of $275 million in debt and $100 million in debtor-in-possession financing. The transaction is being structured as a debt-for-equity deal, rather than a sale of assets. As a result, the chain will continue operating without the disruptions involved with an outright sale, such as the need to transfer hundreds of liquor licenses.

A July 23 auction was cancelled after Red Lobster did not receive any purchase bids except for RL Purchase. A July 29 hearing is scheduled to approve the sale.

Red Lobster filed for Chapter 11 relief in the U.S. District Court for the Middle District of Florida May 19, just days after it shuttered nearly 100 locations nationwide. The spate of closures included four restaurants in New Jersey Bridgewater, Ledgewood, Lawrenceville and East Brunswick.

At the time, Jonathan Tibus said he believed the restructuring “is the best path forward.” Tibus is Red Lobster’s fifth CEO since 2021. According to him, the plan allows the company a chance to address “several financial and operational challenges.”

Still a big fish

In recent years, the chain has struggled with a significant debt load, executive turnover and unfavorable lease terms. Last year’s all-you-can-eat shrimp promotion also resulted in a major loss for the company after it was permanently added to the menu.

In its petition, Red Lobster reported a 30% drop in guests since 2019. It had a mere $30 million in cash on hand against more than $1 billion in debt to thousands of creditors.

Despite the smaller footprint, Red Lobster remains the largest seafood restaurant chain in the U.S., with about 570 locations.

Brad Sandler, attorney for the official committee of unsecured creditors in the case, told SeafoodSource ,“We frankly think it’s a very good development. Fortress has a lot of experience in the restaurant industry. They will be very constructive partners to the vendors, to the landlords, and to the employees."

Sandler also said a sale to Fortress should allow Red Lobster to continue operating “more or less as usual” and “without further closures.”

As part of the bankruptcy plan, Red Lobster identified at least 100 locations that could go dark if it was unable to renegotiate lease agreements for the properties. The list included three New Jersey restaurants: Delran, Mays Landing and Paramus.

Some additional restaurants may close if talks are unsuccessful with landlords. However, Sandler he believes “the vast majority” will remain open.

Fortress is also the owner of SPB Hospitality . The umbrella company's portfolio includes Old Chicago Pizza + Taproom, Krystal, Logan’s Roadhouse, J. Alexander’s, Gordon Biersch Brewery Restaurant, Rock Bottom Restaurant & Brewery and Ragtime Tavern.

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See also:

• Big Lots, with NJ footprint, mulls store closures, bankruptcy



• Walgreens expects to close a ‘significant’ number of stores



• Bankrupt Rite Aid plans NJ store closures (updated)

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