Red Lobster has filed for Chapter 11 bankruptcy, as expected, after the seafood restaurant chain buckled under mounting losses, costly leases, and rising material and labor costs.
The company listed assets of $1B-$10B and estimated liabilities of $1B-$10B in its bankruptcy petition filed in the U.S. Bankruptcy Court for the Middle District of Florida.
Red Lobster intends to use the bankruptcy proceedings to drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets as a going concern.
The company has entered into a stalking horse purchase agreement to sell its business to an entity formed and controlled by its existing term lenders. It has also received a $100M debtor-in-possession financing commitment from its existing lenders.
Red Lobster’s restaurants will remain open and operating as usual during the Chapter 11 process. “This restructuring is the best path forward for Red Lobster,” its CEO Jonathan Tibus said. “It allows us to address several financial and operational challenges and emerge stronger.”
Thai Union Group (OTCPK:TUFBY), which picked up a stake in Red Lobster in 2020, said earlier this year it would exit the chain due to “prolonged negative financial contributions.”