Red Lobster Nears Bankruptcy Exit — Will Consumers Get Their Cheddar Biscuits Soon?

Restaurant company Red Lobster is nearing an exit from Chapter 11 bankruptcy, which was announced earlier this year.

What Happened: News of Red Lobster declaring bankruptcy prompted a mix of memories from consumers who had visited the restaurants over the year, including the world's richest consumer Elon Musk.

Musk and others may have good news on the horizon with a Chapter 11 plan hoping to power Red Lobster into the future.

The restaurant company is set to be acquired by RL Investor Holdings LLC, an entity backed by Fortress Investment Group. Co-investors in the entity include TCW Private Credit and Blue Torch. The acquisition is expected to close by the end of September.

"This is a great day for Red Lobster. With our new backers, we have a comprehensive and long-term investment plan — including a commitment of more than $60 million in new funding — that will help to reinvigorate the iconic brand while keeping the best of its history," new Red Lobster CEO Damola Adamolekun said.

Adamolekun, who previously served as CEO Of P.F. Chang's replaces Jonathan Tibus, who served as the company's CEO during the reorganization and is stepping down from the company.

"Red Lobster has a tremendous future, and I cannot wait to get started on our plan with the Company's more than 30,000 team members across the USA and Canada," Adamolekun added

With the reorganization, Red Lobster will operate as an independent company. The restaurant company, which is the world's largest seafood restaurant chain, currently has 544 locations open in 44 U.S. states and four Canadian provinces.

Read Also: The Craziest Parts Of The Red Lobster Bankruptcy Story Revealed

Why It's Important: The bankruptcy of Red Lobster shocked some in the restaurant sector and came with reports that an all-you-can-eat shrimp promotion hurt the company's financials.

The company's high level of debt and a 30% decline in guest count since 2019 likely also played into the equation, as reported by USA Today.

Fortress is also the owner of SPB Hospitality, a company that owns restaurants Logan's Roadhouse, Old Chicago Pizza & Taproom and Twisted Tenders. Fortress also has acquired several other companies out of bankruptcy in recent years including Vice Media and Alamo Drafthouse.

"It's definitely an area where we have a lot of experience," Fortress spokesperson Gordon Runté told USA Today. "Red Lobster is a big undertaking, it is 500-plus locations, but we're excited about the prospects for the restaurant."

The news of the company exiting bankruptcy comes as 23 Red Lobster restaurants were closed last week, bringing the total closed count to 129 in the U.S.

Red Lobster was previously owned and operated by publicly traded Darden Restaurants DRI. The company sold Red Lobster to Golden Gate Capital in 2014. The move was done by Darden to reduce debt, maintain its dividend payment coverage and focus on its Olive Garden brand.

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• It Was A Bad Real Estate Deal, Not A Bad Meal Deal That Killed Red Lobster

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