Red Lobster, a popular seafood restaurant chain, is on the verge of changing ownership two months after filing for Chapter 11 bankruptcy. A stalking horse bidder, RL Purchaser LLC, has emerged as the likely new owner of the company, according to court documents.
This entity, organized and controlled by Fortress Credit Corporation, is made up of Red Lobster’s lenders and has bid $376 million to acquire the chain’s remaining assets.
The bankruptcy filing in May revealed that Red Lobster was facing significant challenges, including substantial debt, frequent changes in leadership, and a 30% decrease in customer visits since 2019. The company’s financial struggles led to the closure of dozens of locations across the country.
Interestingly, no other bidders came forward before the July 18 deadline, resulting in the cancellation of the planned auction. As a result, RL Purchaser LLC won by default as the stalking horse bidder. A hearing is scheduled for July 29 to approve the sale of assets.
Red Lobster’s CEO, Jonathan Tibus, has outlined a plan for the company’s future, focusing on improving employee culture, enhancing customer experience, and reducing costs without compromising quality. The sale is expected to provide Red Lobster with more flexibility to reorganize and implement these changes.
Despite the closures, many Red Lobster locations remain open. In Florida, for example, while 17 restaurants shut their doors in June, several locations in Miami-Dade, Broward, and West Palm Beach areas continue to operate.
The financial situation that led to the bankruptcy was dire, with the company reporting over $1 billion in debt and less than $30 million in cash on hand. This reflects broader challenges in the restaurant industry, including increased competition from fast-casual chains and the impact of inflation.
Red Lobster’s struggles are particularly notable given its once-dominant position in the seafood restaurant market. The chain, which brought affordable shrimp and lobster to middle-class America, grew to become the largest seafood restaurant chain in the world. It currently serves 64 million customers annually across 578 restaurants in 44 states and Canada.