Red Lobster's Bankruptcy and Stalking Horse Bid: What You Need to Know
Explore the details of Red Lobster's bankruptcy filing, stalking horse bid, and landlords' objections in this comprehensive article.
Photo by Louis Hansel on Unsplash
Photo by Louis Hansel on Unsplash
Financial Restructuring with Fortress Credit Corp.
In January 2021, Red Lobster found itself in a financial predicament, leading to a financing agreement with Fortress Credit Corp. and other lenders to modify its Prepetition Term Loan Credit Agreement. The lenders were owed a substantial sum, over $264 million, by the time Red Lobster filed for bankruptcy in May 2021.
Photo by Louis Hansel on Unsplash
Stalking Horse Bid Details
The proposed purchase price for the stalking horse bid stood at $376 million, as reported by various media outlets. This bid included a unique arrangement where existing lenders, notably Fortress, would gain ownership of Red Lobster through an equity transfer rather than receiving the owed money directly. The bid encompassed a dollar-for-dollar credit bid of debtor-in-possession obligations, assumed liabilities, and excluded cash.
Photo by Louis Hansel on Unsplash
Challenges with Landlords' Objections
While Red Lobster's sales process progressed, it faced resistance from landlords who raised objections to the payback plan. Many landlords expressed dissatisfaction with the proposed payments, seeking more money than what Red Lobster offered. One notable objection was from Shorenstein Properties over a property in Tigard, Oregon, where the landlord claimed over $20,000 in owed payments.
Photo by Louis Hansel on Unsplash
Uncertainty Around Lease Terms
The issue of lease terms further complicated Red Lobster's situation. In response to landlords wanting better lease terms, Red Lobster had to take drastic measures, including closing 95 units and threatening to close another 120. The uncertainty surrounding lease negotiations might lead the court to intervene and determine the final obligations owed to landlords.