In a move that is being hailed around the web as ‘a win for lobsters,’ Red Lobster has filed for bankruptcy protection. This closely follows the abrupt closure of dozens of stores across the United States as the company enters into restructuring.

The news of the bankruptcy broke on Sunday, May 19, 2024, at which time, the company issued a press release that said that it intends to use the proceedings “to drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets as a going concern.”

“As part of these filings, Red Lobster has entered into a stalking horse purchase agreement pursuant to which Red Lobster will sell its business to an entity formed and controlled by its existing term lenders,” the release also said.

It also stated that the Red Lobster restaurants that haven't yet been shuttered will remain open and operational amid the restructuring proceedings. That includes 27 locations across Canada. As well, the company runs well over 500 locations in the United States, and close to 30 across Mexico, Japan, Ecuador, and Thailand. “The company has been working with vendors to ensure that operations are unaffected and has received a $100M debtor-in-possession financing commitment from its existing lenders.”

Meanwhile, Red Lobster's CEO, Jonathan Tibus, explained that “restructuring is the best path forward” for the company. “It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth,” he said. “The support we’ve received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests.”

As explained in the court documents, Red Lobster Management LLC, and 14 of its affiliates — they are collectively named in the documents as “the debtors” — filed petitions in the United States Bankruptcy Court for the Middle District of Florida seeking relief under Chapter 11 of the United States Bankruptcy Code on May 19, 2024.

According to the US courts, a case filed under Chapter 11 of the US Bankruptcy Code is often referred to as a “reorganization” bankruptcy. “Usually, the debtor remains 'in possession,' has the powers and duties of a trustee, may continue to operate its business, and may, with court approval, borrow new money.”

It seems then, that this is an atypical case of a Chapter 11, given the fact that sales proceedings have been started.

In any case, with some 600 stores remaining open as the restructuring proceedings unfold, there's still time to get your Cheddar Bay Biscuit fill.