Red Lobster Set to Be Acquired by Fortress Credit Corporation Following Chapter 11 Bankruptcy

Two months after filing for Chapter 11 bankruptcy, Red Lobster could soon be changing hands. A stalking horse bidder listed as RL Purchaser LLC − a newly formed entity organized and controlled by Fortress Credit Corporation − is set to be the chain’s new owner, according to court documents filed Monday in the Middle District of Florida in Orlando.

RL Purchaser LLC, which consists of Red Lobster’s lenders, bid $376 million to acquire the company’s remaining assets, according to the Orlando Business Journal.

Red Lobster filed for bankruptcy on May 19 after closing dozens of locations and announcing plans to “drive operational improvements” by simplifying the business. Documents later filed in federal court revealed that the bankruptcy was primarily due to significant debt, a carousel of CEOs, an all-you-can-eat shrimp fiasco, and a 30% drop in guests since 2019.

This acquisition would mark Fortress’ latest purchase of a company in bankruptcy, following acquisitions of Vice Media and Alamo Drafthouse, which was later sold to Sony Pictures Entertainment, as reported by Reuters.

USA TODAY contacted Red Lobster and its attorneys on Tuesday for comment but received no response. Fortress declined to comment on Tuesday.

No Other Bidders for Red Lobster Following Bankruptcy Filing

Initially, Red Lobster was to be sold through a traditional auction, but no bidders came forward before the company’s July 18 deadline, leading to the auction’s cancellation and the default win for the stalking horse bidder, RL Purchaser LLC, as reported by the Orlando Business Journal. The company’s shift away from a traditional asset sale was indicated during a July 10 hearing.

“So, the idea is to … maintain operational continuity and potentially reduce the costs and complexities associated with a traditional asset sale,” attorney Jeffrey Dutson of King & Spalding LLP, representing Red Lobster, said during the hearing, per the Orlando Business Journal.

With the auction canceled, RL Purchaser LLC is now the “successful bidder.” A hearing is scheduled for July 29 for the approval of the sale of the assets, according to federal court documents.

What is a Stalking Horse Bidder?

A stalking horse bidder is an initial bid on the assets of a bankrupt company, designed to set the low-end bidding bar so that other bidders cannot underbid the purchase price. In this case, Red Lobster chose RL Purchaser LLC to make the first bid on its remaining assets.

Implications of the Sale for Red Lobster

The sale of Red Lobster is expected to provide the company with more flexibility to reorganize. The chain aims to enhance its marketing and supply chain management efficiency and improve customer experience and operational effectiveness, as outlined by Red Lobster CEO Jonathan Tibus in a 124-page bankruptcy document.

Tibus detailed a “three-prong strategic priority plan,” which includes making Red Lobster a “great place to work” by focusing on employee culture and retention, continuing to provide “consistent experiences and excellent customer service,” and reducing the company’s cost structure without compromising quality.

After closing and vacating dozens of stores, Red Lobster continues to identify and eliminate nonproductive spending across all departments. The chain has attempted to relocate employees from financially burdensome stores to nearby locations and adjust midlevel management.

It remains unclear if Tibus’ plan will come to fruition or if he will continue to serve as CEO following the sale. The upcoming hearing on July 29 will determine the future ownership and direction of Red Lobster.