Red Lobster, a leading US-based seafood restaurant operator with over 550 restaurants in the US and 27 in Canada, is later today seeking an interim stay of proceedings pending Canadian recognition of its US Chapter 11 proceedings filed on May 19.

In recent years, the company, like many other casual dining restaurants, faced significant challenges, including disruptions to its supply chain, hyperinflation affecting food, labour, and delivery costs, substantial increases in the cost of capital and real property leases, and shifts in casual dining trends. It also faced financial performance challenges as a result of its “Ultimate Endless Shrimp” promotion, which caused a significant cash drain and saddled it with burdensome supply obligations.

Unable to obtain additional capital and facing a looming liquidity crisis, the company has formulated a strategic transaction whereby its existing lending syndicate, led by Fortress Credit, will provide additional capital to fund the insolvency proceedings and also serve as a proposed stalking horse bidder for the business.

In Canada, FTI is the proposed information officer. Canadian counsel is Blakes for the company, Fasken for the proposed information officer and Torys for Fortress.

By: Dina Milivojevic