Dive Brief:
- Red Lobster canceled a sales auction, originally set for Tuesday, as it did not get qualified bids other than the one it received from its stalking horse bidder on July 18, the bidding deadline, according to a document filed on Monday.
- The company previously selected RL Purchaser, an entity organized and controlled by existing term lenders, as its stalking horse bidder.
- A sales hearing will be held on July 29 to approve the sale to the successful bidder.
Dive Insight:
On Jan. 22, 2021, Red Lobster entered into a financing agreement with Fortress Credit Corp. as an administrative agent and the other lenders to modify the Prepetition Term Loan Credit Agreement. As of the date of its bankruptcy filing on May 19, the lenders were owed over $264 million. The purchase price of the stalking horse bid will include a credit bid on a dollar-for-dollar basis of the full debtor-in-possession obligations, the assumption of all assumed liabilities and the excluded cash.
The proposed purchase price for the stalking horse bid was for $376 million, according to media reports. As part of the stalking horse bid, its existing lenders, including Fortress, will obtain ownership of Red Lobster in an equity transfer instead of getting the money that is owed to them.
While the sales process has been moving along smoothly, several of the chain’s landlords have issued objections over its payback plan, according to the Orlando Business Journal. Many landlords want more money than Red Lobster is offering. Shorenstein Properties objected to a payment of $0 over a property in Tigard, Oregon, where the landlord said it is owed over $20,000. Landlords also want further assurance that the buyer can pay rent owed as well as future rents.
Red Lobster previously closed 95 and threatened to close another 120 units if better lease terms couldn’t be secured. It is possible that, if lease terms aren’t resolved, the court will review contracts to determine what the amount owed to landlords will be.
