(Toronto) A Canadian court has approved Red Lobster’s reorganization plan that will allow the lobster and seafood restaurant chain to emerge from bankruptcy.
Toronto Superior Court Justice Peter Cavanagh granted an order Tuesday recognizing and launching the plan approved by a U.S. bankruptcy judge last week.
The future of the chain, best known for its seafood offerings, Cheddar Bay biscuits and family-friendly atmosphere, was thrown into doubt when its Florida-based parent company filed for Chapter 11 bankruptcy in the U.S. in May and closed dozens of restaurants.
The retailer has been hit by pandemic-related disruptions including supply chain issues, inflation and a drop in demand that persisted after restrictions were lifted, while it also faced more specific challenges such as its endless discounting of shrimp that caused it to lose money.
The plan is expected to allow the chain’s 27 restaurants in Canada to remain open. In total, 544 locations will remain in operation, down from the 578 locations that were open before the company declared bankruptcy in May.
“The plan, when implemented, will allow for the continued operation of Red Lobster restaurants in Canada, preserve RL Canada’s jobs and maintain the value of RL Canada’s business for the benefit of all stakeholders, including owners, suppliers and customers,” the company said in a Sept. 9 filing ahead of the hearing.
U.S. approval of the restructuring plan was contingent, among other conditions, on further approval by the Canadian court.
A group of lenders led by asset manager Fortress will acquire the company, a new president and CEO will be appointed and US$60 million will be provided in financing.
Under the 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 bankruptcy exit plan includes the creation of a fund where unsecured creditors and disputed claims can apply for compensation.
Red Lobster was founded in 1968 in the United States and expanded to Canada in 1983. The chain employs approximately 2,000 people in Ontario, Manitoba, Saskatchewan and Alberta.
With files from Associated Press