Red Lobster, the largest seafood restaurant chain in the US, has filed for bankruptcy protection to reduce debt and sell its assets.
On Sunday, May 19, the casual dining chain filed for Chapter 11 relief in the US Bankruptcy Court for the Middle District of Florida.
Red Lobster plans to use the bankruptcy proceedings to reduce the number of restaurants it operates.
It is also looking to improve operational efficiency, and simplify its business structure.
Under a stalking-horse agreement, the company will sell its business to an entity formed and controlled by its existing term lenders.
The Orlando-based company has been working with vendors to ensure normal operations.
It secured a $100 million debtor-in-possession financing commitment from existing lenders.
Red Lobster will use the bankruptcy proceedings to reduce the number of its restaurants
The Wall Street Journal reported last week Red Lobster was expected to file for bankruptcy after closing dozens of its approximately 650 US locations.
According to Red Lobster’s liquidator, the closures spanned about 20 states.
These include Denver, San Diego, Indianapolis, San Antonio, and Orlando.
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Several restaurant chains have recently declared bankruptcy or are seeking a sale due to higher finance costs, slower consumer spending, and declining investor interest in food investments.
According to filings and restaurant executives, these factors have negatively impacted restaurant balance sheets.
CEO Jonathan Tibus said: “This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and refocused on our growth.”
One of Red Lobster’s shareholders, Thai Union, which spent $575 million for a minority stake in 2016, announced in January that it was looking to exit its investment.
Thai Union plans to record a $530 million non-cash impairment charge in the fourth quarter of 2023.
