Popular seafood restaurant chain Red Lobster filed for Chapter 11 bankruptcy late Sunday, just days after shuttering several locations across the country.
The filing for bankruptcy protection was made in the U.S. Bankruptcy Court for the Middle District of Florida over the weekend. The company intends to use this process to streamline operations, reduce the number of locations, and facilitate the sale of all its assets. According to the company, Red Lobster will continue operating normally during the bankruptcy proceedings.
“This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth. 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,” said Red Lobster CEO Jonathan Tibus in a statement on Sunday.
The company’s filings disclosed entering into a “stalking horse purchase agreement,” enabling the sale of the company to a business controlled by its lenders. Red Lobster will maintain operations with the support of a $100 million debtor-in-possession commitment from its lenders. Court documents revealed that the company has over $1 billion in debt against $30 million in available cash.
Red Lobster opened its inaugural location in Lakeland, Florida, in 1968. It became part of General Mills shortly thereafter and was later spun off along with the rest of General Mills’ restaurant division under Darden Restaurants, Inc. in 1995. After becoming independent from Darden—owner of Olive Garden and LongHorn Steakhouse—in 2014, Red Lobster has faced financial struggles in recent years.
Red Lobster has 551 locations in the United States, along with 27 in Canada and 27 franchised restaurants in Mexico, Ecuador, Japan, and Thailand.
The sudden closure of over 50 locations last week fueled speculations about an impending bankruptcy filing by the company.
