Red Lobster is on track to be sold out of bankruptcy to lender Fortress Investment Group after no other bidders came forward for the struggling seafood chain.
Fortress is the stalking-horse bidder in the chain’s Chapter 11 case, meaning it was allowed to set the starting price for the company. That price is approximately $375 million, and consists of $275 million in debt and $100 million in debtor-in-possession financing, according to bankruptcy documents.
The deadline for other bids was Friday. A court hearing on the sale is scheduled for July 29.
New York-based Fortress is the owner of SPB Hospitality, an umbrella company for more than a dozen restaurant concepts that Fortress acquired out of bankruptcy in recent years. They include the 293-unit Krystal Co. fast-food chain as well as Logan’s Roadhouse, Old Chicago Pizza and about 10 other full-service brands.
Brad Sandler, an attorney representing the unsecured creditors’ committee in the case, said a sale to Fortress should allow Red Lobster to continue operating more or less as usual and without further closures.
“The overarching goal of the committee was to make sure that there was a viable go-forward business with a maximum footprint,” he said. “That’s what this transaction does.”
He added that Fortress has a lot of restaurant experience that should be “extremely positive and constructive” for Red Lobster going forward.
Red Lobster indicated earlier this month that it plans to structure the transaction as a debt-for-equity deal rather than a sale of its assets. That approach will allow the chain to continue operating without the disruptions involved with an outright sale, such as the need to transfer hundreds of liquor licenses to a new company.
The 570-unit Orlando-based chain has struggled for years with weak sales. In bankruptcy filings, it blamed inflation pressures, burdensome leases and mismanagement for its financial problems.
Days before the filing in May, the chain closed nearly 100 underperforming restaurants. It could close more if it is unable to renegotiate leases with landlords, though Sandler said he suspected that "the vast majority of the footprint" will remain open.
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