Red Lobster Mulls Bankruptcy Over Debt and Lease Concerns

red lobster

Seafood restaurant chain Red Lobster is reportedly considering a Chapter 11 bankruptcy filing to address its financial challenges, particularly concerning leases and labor costs.

According to sources familiar with the matter, Red Lobster has been seeking guidance from law firm King & Spalding on potential restructuring options. The company is contemplating a Chapter 11 filing to alleviate burdensome long-term contracts and renegotiate leases.

Red Lobster has been grappling with cash flow issues exacerbated by high lease commitments and labor expenses, among other factors. Discussions regarding restructuring are ongoing, and a final decision has not been reached. Opting for bankruptcy protection would enable the company to continue operations while working on a strategy to reduce its debt.

Attempts to reach out to Red Lobster and King & Spalding for comment were unsuccessful.

Founded in 1968 with its origins in Lakeland, Florida, Red Lobster has expanded to numerous locations across the United States, Canada, and international markets. Renowned for its cheese-flavored biscuits introduced in 1992, the chain has become a staple in the casual dining landscape.

In recent years, Red Lobster has experienced shifts in ownership and management. Thai Union Group Plc, which assumed control in 2021, recently devalued its stake in the company, citing misalignment between Red Lobster’s financial needs and Thai Union’s investment priorities.

Fortress Investment Group, a significant creditor to Red Lobster, is reportedly engaged in ongoing discussions regarding the restaurant chain’s debt. However, representatives from Fortress declined to provide any comments.

Orlando-based Red Lobster was acquired by Golden Gate Capital in 2014 through a leveraged buyout from Darden Restaurants. Thai Union previously held a 25% stake in the chain before acquiring Golden Gate’s share in 2021.

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