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First-day declaration – Jonathon Tibus

Red Lobster secured access to $40mn of its $100mn new money DIP facility during a first-day hearing today in the Middle District of Florida Bankruptcy Court. The seafood restaurant chain will seek a going concern sale to an entity backed by its term loan lenders, in accordance with the terms laid out in its RSA.

Red Lobster is set to undertake a Section 363 sale process, with the prepetition term loan lenders positioned to credit bid 100% of the DIP term loan as the stalking horse bid in the case. Hilco Global has been appointed as the investment banker to steer the process, with preparations underway for bidding procedures and an auction projected for late July and a sale in August.


During the proceedings, debtor counsel from King & Spalding detailed the company’s intent to conduct an in-depth review of its operational and financial strategies. This examination will especially focus on various promotions that may have negatively impacted Red Lobster’s operational and financial health, including its endless shrimp promotion, according to counsel.

Red Lobster immediately shuttered 95 of its underperforming locations out of a total of 550, right after its filing on Sunday night. Plans are in place to reject leases for an additional 101 locations in the coming weeks, reducing its retail footprint by 36%.

Presiding Judge Grace Robson granted the interim DIP access, alongside approving other customary first-day motions. The debtor will have immediate access to $40mn today, with the remainder subject to a final hearing. In addition to the new money portion, the debtor will seek a roll-up of prepetition term loan holdings by the DIP lenders in a ratio of 1.75:1 at the final hearing.

Jennifer Lappe, J.D.
+1 346 256 1345


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