By Dietrich Knauth
NEW YORK (Reuters) - Red Lobster is moving closer to a bankruptcy sale that would put lenders, including Fortress Investment Group, in charge of the company after no other bidders stepped up with an offer to repay the struggling U.S. restaurant chain's debt, according to court documents.
Red Lobster filed for bankruptcy in Florida in May with about $300 million in debt and a plan to close some restaurants and sell itself to its lenders or a higher bidder.
The company, which took an additional $100 million loan to fund its restructuring, had planned to conduct an auction on Tuesday, but it said in a Monday court filing that it had received no qualified bids.
Red Lobster was willing to consider bids for the entire company if a buyer could pay at least $2.5 million more than the company's debt, according to the court documents.
Without a better offer, Red Lobster will hand over its equity to its lenders in a debt-cancelation deal and continue to operate with fewer locations.
The company closed 93 locations earlier in the year, and it did not immediately respond on Tuesday to a question about how many locations would remain open after its bankruptcy.
Red Lobster entered bankruptcy with about 550 casual dining restaurants in the U.S. and 54 restaurants in other countries. It posted a $76 million net loss in 2023 and blamed its bankruptcy on high inflation, unsustainable rent costs, and poor management decisions including an "endless shrimp" promotion that caused $11 million in losses.
A spokesman for Fortress declined to comment on the sale before it was completed. Red Lobster did not immediately respond to a request for comment.
Fortress has acquired other brands out of bankruptcy in recent years, including Vice Media and movie theater chain Alamo Drafthouse. Alamo Drafthouse was later sold to Sony (NYSE:SONY) Pictures Entertainment, while Vice cut hundreds of jobs and temporarily shuttered Vice.com before relaunching the news website in partnership with Savage Ventures.