Red Lobster filed a petition for Chapter 11 bankruptcy in Florida on Sunday, according to court documents and a statement from the company.
There's no need to start pining for your cheddar bay biscuits quite yet, though.
The company says it plans to keep its restaurants open and service customers while it uses the bankruptcy protection 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."
That sale will almost certainly be a company that has recently been formed by its creditors in a deal called a "stalking horse arrangement," which essentially allows a bankrupt company to choose its buyer.
A statement filed with the court in support of the bankruptcy petition stated that the company has seen foot traffic in its restaurants drop by nearly a third since 2019 and that its guest count had only "marginally improved" since bottoming out during 2020 and 2021 lockdowns and pandemic fears.
"The latest symptom of this decline is Red Lobster's $76 million net lost during fiscal year 2023," the court filing said.
"Perhaps the most prominent of the poor decisions was an 'endless shrimp' offering by a previous CEO that [current CEO Jonathan] Tibus said ultimately cost the company $11 million," according to NBC News. "The circumstances that led to the promotion are under investigation, Tibus said."
The presumptive buyer, however, had already guaranteed loans to the company of $100 million to continue operations and reorganize, the outlet reported.
The 56-year-old company announced last week that 99 of its locations would be closing in the near future and their equipment auctioned off, according to NBC.
The number of Red Lobster restaurants has grown from one family-owned location in Lakeland, Florida, to over 700 worldwide today, according to the company's website.
A copy of the company's bankruptcy petition is available here.
The news release, edited slightly, can be read below, or in its original format here.
Red Lobster Management LLC, along with its direct and indirect operating subsidiaries ("Red Lobster" or "the Company"), owner and operator of the Red Lobster® restaurant chain, today announced that the Company has voluntarily filed for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Florida. The Company intends to use the 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. As part of these filings, Red Lobster has entered into a stalking horse purchase agreement pursuant to which Red Lobster will sell its business to an entity formed and controlled by its existing term lenders.
Red Lobster's restaurants will remain open and operating as usual during the Chapter 11 process, continuing to be the world's largest and most-loved seafood restaurant company. The Company has been working with vendors to ensure that operations are unaffected and has received a $100 million debtor-in-possession ("DIP") financing commitment from its existing lenders.
Jonathan Tibus, the Company's CEO, 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 re-focused on our growth. The support we've received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests."
Court filings and information about the claims process can be found at a separate website maintained by Red Lobster's claims agent, https://dm.epiq11.com/RedLobster, or by calling Toll Free (U.S.& Canada): (888) 754-0507.
King & Spalding LLP, Berger Singerman LLP and Blake, Cassel & Graydon, LLC are serving as legal advisors. Alvarez & Marsal is serving as financial advisor and providing corporate leadership as Chief Executive and Chief Restructuring Officers. Hilco Corporate Finance is serving as M&A advisor to Red Lobster. Keen-Summit is serving as real estate advisor.
