A Canadian court has cleared the reorganization plan of Red Lobster that will see the seafood chain exit bankruptcy.
Justice Peter Cavanagh of the Superior Court of Justice in Toronto on Tuesday granted an order that recognizes and gives force to the plan approved by a U.S. bankruptcy judge last week.
The future of the chain, best known for its expansive seafood offerings, Cheddar Bay biscuits and family-friendly atmosphere, was thrown into question when its Florida-based parent company filed for Chapter 11 bankruptcy in the U.S. in May and shuttered dozens of restaurants.
The restaurant had been confronted with unfavourable real estate transactions, as well as pandemic disruptions including supply chain issues, cost inflation, and reduced demand that lingered after restrictions lifted. A much-ballyhooed endless shrimp promotion was priced too low, the company has since said, and lost Red Lobster $20 million US by some estimates.
The restructuring is expected to allow all 27 restaurants in Canada to remain open as part of the roughly 544 total locations that will stay in operation. That’s down from 578 as of May.
LISTEN | Emily Stewart of Business Insider on Red Lobster’s woes (May 23):
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The restaurant chain is being acquired by RL Investor Holdings LLC. The new entity is comprised of investors Fortress Investment Group LLC, TCW Private Credit and Blue Torch.
“The plan, when implemented, will continue the operation of Red Lobster’s restaurants in Canada, preserve the employment of the RL Canada’s employees and maintain the value of RL Canada’s business for the benefit of all stakeholders, including landlords, suppliers and customers,” the company said in a Sept. 9 report ahead of the hearing.
Around 2,000 Canadian employees
Red Lobster was founded in 1968 in the U.S. and expanded into Canada in 1983. The chain employs about 2,000 people in Canada, mostly across Ontario, with restaurant locations also in Calgary, Edmonton, Regina, Saskatoon and Winnipeg.
U.S. approval of the restructuring plan was, among other conditions, contingent on the plan’s approval by the Canadian court.
The restructuring will see the lender group led by Fortress pour more than $60 million in new funding into operations. It was previously announced the new CEO of RL Investor Holdings will be Damola Adamolekun, 35, a Nigerian-born American who most recently was CEO of restaurant chain P.F. Chang’s.
Under terms of the acquisition, which is expected to close by the end of September, the chain will continue to operate as an independent company.
The plan to exit bankruptcy includes setting up a fund where unsecured creditors and litigation claims can apply for compensation.
