TORONTO — A Canadian court has cleared the reorganization plan of Red Lobster that will see the seafood chain exit bankruptcy.
Justice Peter Cavanagh of the Superior Court of Justice in Toronto on Tuesday granted an order that recognizes and gives force to the plan approved by a U.S. bankruptcy judge last week.
The future of the chain, best known for its expansive seafood offerings, Cheddar Bay biscuits and family-friendly atmosphere, was thrown into question when its Florida-based parent company filed for Chapter 11 bankruptcy in the U.S. in May and shuttered dozens of restaurants.
The restaurant had been hit by pandemic disruptions including supply chain issues, cost inflation and reduced demand that lingered after restrictions lifted, while it also faced more specific challenges such as its money-losing endless shrimp promotion.
The restructuring is expected to allow all 27 restaurants in Canada to remain open as part of the roughly 544 total locations that will stay in operation. That’s down from 578 as of May.
“The plan, when implemented, will continue the operation of Red Lobster’s restaurants in Canada, preserve the employment of the RL Canada’s employees, and maintain the value of RL Canada’s business for the benefit of all stakeholders, including landlords, suppliers, and customers,” the company said in a Sept. 9 report ahead of the hearing.
U.S. approval of the restructuring plan was, among other conditions, contingent on the plan’s approval by the Canadian court.
The restructuring will see a lender group led by asset manager Fortress acquire the business, a new CEO being installed and a commitment of more than US$60 million in new funding.
Under terms of the acquisition, which is expected to close by the end of September, the chain will continue to operate as an independent company.
The plan to exit bankruptcy includes setting up a fund where unsecured creditors and litigation claims can apply for compensation.
Red Lobster was founded in 1968 in the U.S. and expanded into Canada in 1983. The chain employs about 2,000 people across Ontario, Manitoba, Saskatchewan and Alberta.
-- With files from AP.
This report by The Canadian Press was first published Sept. 10, 2024.
The Canadian Press