The chain’s financial difficulties have led to restaurant closures across the country, including two in Dallas.
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Red Lobster Management LLC filed “successful bidder” papers on July 22 in the U.S. Bankruptcy Court for the Middle District of Florida in Orlando.
The Florida-based seafood chain’s new owner is RL Purchaser LLC, a stalking horse bidder made up of Red Lobster’s lenders, which proposed a bid of $376 million.
If the restaurant company’s July 19 reorganization plan is finalized, the transaction would include a stock transfer, with the buyer receiving shares in the reorganized company in exchange for purchasing the company’s assets outright.
This approach will allow Red Lobster’s lenders to own Red Lobster while preserving its existing structure and covenants, ensuring debt repayment and operational continuity. The transition avoids the complexities and liabilities associated with a traditional asset sale.
The original plan was a more traditional sale, but after no one came forward to bid for the company by the July 18 deadline, the auction was called off and a stalking horse bidder was awarded a walkover. The lack of bidders may have been apparent earlier, as a July 10 hearing on the matter revealed the change of course.
“So the idea is to maintain continuity of operations and reduce the costs and complexities associated with a traditional asset sale,” said Jeffrey Dutson, an attorney with the law firm King & Spalding, who appeared at the hearing via Zoom on behalf of Red Lobster.
Judge Grace Robson appeared to support the plan during a July 10 hearing.
“It seems to me like it makes business sense and makes sense in this regard, but I won’t know until I see the paperwork,” Robinson previously said. “I’m not going to pre-approve, but so far I’m OK with the concept.”
The July 19 filing outlined how Dutson’s proposal would be implemented and how the money paid by the buyer, now identified as RL Purchaser LLC, would be distributed.
- The lender will receive 60% of any damages it wins in a lawsuit against the owner.
- Unsecured creditors will receive 40% of any damages they win in lawsuits against the owners.
- Lawyers and other professional service providers are paid.
- In addition to their share of the lawsuit award, unsecured creditors will receive a distribution based on available funds after payment of attorneys’ fees.
The restructuring plan also includes streamlining key departments such as marketing and supply chain management. The plan did not specify which technologies would be integrated, but stressed the importance of improving customer experience and operational efficiency.
The plan does not mention certain key components, such as:
- How will Red Lobster weather competitive pressures?
- Business improvement and cost management beyond restructuring
- How Red Lobster is responding to changing consumer tastes and food trends
- Long-term Financial Forecast
Red Lobster filed for Chapter 11 bankruptcy protection on May 19. The chain’s financial difficulties have led to restaurant closures across the country, including two in Dallas.
Red Lobster’s bankruptcy also sparked disputes with landlords The company is in a dispute with landlords and other creditors over unpaid bills and lease terms. Recent legal documents show that landlords and other creditors are disputing the amount of compensation the company has offered and are seeking higher payments and security deposits.
