Red Lobster has revealed in documents submitted to a federal court in Florida that RL Purchaser LLC, a stalking horse bidder made up of the business’s lenders, is the new owner of the restaurant chain.
Red Lobster might change hands shortly, two months after declaring Chapter 11 bankruptcy.
In court filings filed on Monday in the Middle District of Florida in Orlando, a stalking horse bidder identified as RL Purchaser LLC—a recently formed business organized and managed by Fortress Credit Corporation—is expected to become the new owner of the chain.
The Orlando Business Journal reports that Red Lobster’s lenders, under the name RL Purchaser LLC, submitted a $376 million bid to buy the company’s remaining assets.
Red Lobster announced plans to “drive operational improvements” by streamlining the company and closed dozens of stores before filing for bankruptcy on May 19. Subsequently submitted documents to a federal court disclosed that the main reasons for the bankruptcy were heavy debt, a rotating board of CEOs, the disastrous all-you-can-eat shrimp deal, and a 30% decline in patronage since 2019.
According to Reuters, Fortress previously bought Vice Media and Alamo Drafthouse, which was eventually sold to Sony Pictures Entertainment. Red Lobster would be the company’s most recent bankruptcy acquisition.
Red Lobster and its attorneys were approached by USA TODAY on Tuesday for comment; they have not responded. On Tuesday, Fortress declined to comment.
After filing for Chapter 11 bankruptcy, no bids attempted to purchase Red Lobster.
The well-known chain of seafood restaurants was originally scheduled to be sold through a more typical auction, but before the company’s deadline of July 18, no bids showed up. As a result, the sale was canceled, and the stalking horse bidder emerged victorious by default, According to the Orlando Business Journal. Red Lobster may not have had many bidders since, at a hearing on July 10, the firm said it would no longer be using a standard asset auction.
Red Lobster’s attorney, Jeffrey Dutson of King & Spalding LLP, who appeared via Zoom at the hearing, stated, “So, the idea is to… maintain operational continuity and potentially reduce the costs and complexities associated with a traditional asset sale,” according to the Orlando Business Journal.
Since the sale was postponed till July 23, RL Purchaser LLC is the new “successful bidder.” According to federal court filings, a hearing to approve the sale of the assets is set for July 29.
A stalking horse bidder: what is it?
By definition, a stalking horse bidder is “an initial bid on the assets of a bankrupt company,” according Investopedia.
According to the financial media website, the insolvent company, in this case Red Lobster, selects a party from a pool of bidders to place the highest price for the company’s surviving assets. In order to prevent other bidders from underbidding the purchase price, the stalking horse sets the minimum bid.
How does Red Lobster stand to gain from the sale?
The corporation should be able to reorganize with more freedom now that Red Lobster has been sold. Red Lobster CEO Jonathan Tibus stated in a 124-page bankruptcy filing that the company will try to improve customer experience and operational effectiveness in addition to increasing the efficiency of its marketing and supply chain management.
