Beleaguered seafood eatery Red Lobster filed for Chapter 11 bankruptcy following the recent closing of dozens of restaurants.
The chain entered into a “stalking horse” arrangement late Sunday, according to the Associated Press. That means Red Lobster will sell its business to an entity controlled by its lenders.
Red Lobster CEO and corporate restructuring expert Jonathan Tibus said the 56-year-old Florida-based company plans to scale down operations and further close restaurants while looking for a buyer.
“This restructuring is the best path forward for Red Lobster,” Tibus said. “It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth.”
Numerous insiders told Bloomberg more than a month ago that Red Lobster was considering filing for bankruptcy so the eatery could restructure debts.
Increased competition, rising lease prices and higher labor costs have made the eatery’s popular all-you-can-eat deals less tenable over the past couple years.
A liquidator announced plans to auction equipment from at least 50 recently shuttered Red Lobster in more that 20 states last week. The company operates 700 restaurants globally.
Court filings list Red Lobster’s liabilities and assets between $1 billion and $10 billion. They also show more than 100,000 creditors.
In the first three quarters of 2023, industry-leading seafood supplier Thai Union Group reported a $19 million share of loss from Red Lobster and planned to withdraw the minority investment it’s held since 2016, according to the Associated Press.
An “Ultimate Endless Shrimp” promotion launched toward the end of 2023 succeeded in increasing restaurant traffic, but reportedly turned out to be a money loser.
With News Wire Services
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