Red Lobster hired auction company ‘very recently’ before shutting 50 restaurants, may file for bankruptcy next week: sources
Red Lobster hired a liquidation company on short notice before unexpectedly closing dozens of locations this week — and is expected to file for bankruptcy as early as Monday, The Post has learned.
Auction company TAGeX Brands was retained “very recently” to sell off the furniture and equipment at 50 of the shuttered Red Lobster restaurants, the firm’s founder Neal Sherman told The Post.
“We’ve never seen as many locations be closed and auctioned off at the same time and we’ve been doing this for 37 years,” said Sherman, adding that final bids are due Thursday.
The nation’s largest seafood chain — known for its all-you-can-eat shrimp deal — recently informed vendors that a Chapter 11 filing was imminent after it had failed to find a buyer or reel in new investors, according to a bankruptcy attorney with knowledge of the situation.
“They have been planning to file for a while,” the lawyer, who said he spoke with one large vendor, told The Post.
The Orlando, Fla-based company, which had 650 locations nationwide before the sudden closures, has been mulling filing for bankruptcy, as The Post reported last month.
Late Tuesday, the Wall Street Journal reported that Red Lobster plans to file for bankruptcy before Memorial Day and will use the process to get out of onerous contracts with landlords.
The move could trim hundreds of millions of dollars in debt, according to the outlet.
The expected bankruptcy filing comes after the struggling chain locked out hundreds of employees who had shown up to work and were greeted with a sign saying that their restaurant was closed.
Restaurant Business Magazine reported 99 locations were closing.
Red Lobster has been struggling for years, but the final straw appears to have been a money-losing $20 all-you-can-eat shrimp promotion last summer, which cost the company $11 million.
The company’s largest shareholder – Thai Union, a publicly-held company with a 49% stake – announced in January that it would be exiting its investment shortly after the shrimp fiasco.
The Bangkok-based seafood supplier raised the price of the shrimp deal by $5 by the fall, but still lost money on the promotion.
“We knew the price was cheap, but the idea was to bring more traffic in the restaurants,” Thai Union chief financial officer Ludovic Garnier said on an earnings call. “We need to be much more careful regarding what are the entry points and what is the price point we are offering for this promotion.”
Thai Union, which bought into the brand in 2016 and increased its stake in 2020, took a $530 million write-down on its investment, the company said.
