Should Red Lobster Seafood Co. file for bankruptcy protection? Experts say yes.
Red Lobster Seafood Co. LLC could attract a buyer more easily if it files for Chapter 11 bankruptcy protection in the near future, said Justin Luna, an Orlando-based business bankruptcy lawyer specializing in cases like Red Lobster’s, though he doesn’t represent the seafood chain.
In April, Bloomberg reported that the Orlando-based company was on the verge of bankruptcy while CNBC reported the restaurant chain was seeking a buyer. Red Lobster hasn’t confirmed either report.
“Bankruptcy allows you to shed a lot of debt so you can potentially get rid of those leases and continue to operate,” Luna said. “Either that or put the business in a prime position for acquisition.”
Business bankruptcy attorney Scott Shuker of Orlando — who is not involved with Red Lobster — said Chapter 11 is a great vehicle for getting rid of unwanted locations in the restaurant industry.
“We saw that recently with Tijuana Flats,” he said. “I would guess that right now, Red Lobster is preparing Chapter 11 documents to file. They may be negotiating with their secured lien lender on whether they will be taken out at a discount, and they probably are negotiating with the potential purchaser so that when they [potentially] file bankruptcy, it can go as efficiently and quickly as possible."
