Red Lobster, large restaurant chain, file bankruptcy protection

Red Lobster, one of the largest seafood restaurant chains in the country, officially filed for bankruptcy protection in a federal Middle District of Florida.

The chain said it has filed for Chapter 11 bankruptcy protection Sunday, for now it will continue to operate through the bankruptcy but will reduce its locations and pursue a potential buyer. The chain closed 50 stores last week as rumors reported by Bloomberg and other news outlets swirled about bankruptcy.

Red Lobster said it has entered into “a stalkinghorse purchase agreement to which Red Lobster will sell its business to an entity formed and controlled by its existing term lenders.”

A “stalking horse” bid is an initial bid on the assets of a bankrupt company chosen by the business, which becomes the minimum amount of assets that it can be purchased for.

“This restructuring is the best path forward for Red Lobster,” Jonathan Tibus, the company’s CEO said in the statement. “It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth.”

Red Lobster said it has been in communication with its vendors to make sure the running of its remaining restaurants remain smooth during the bankruptcy. It said the company has received a $100 million debtor-in-possession financial commitment from its existing lenders.

“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,” Tibus said.

Red Lobster lost $73 million last year, part of that on its regular “endless shrimp” promotion that went bad when the company changed the offering from once to a week to daily in an ill-fated effort to boost sales in the second half of 2023.