Red Lobster is millions of dollars in arrears with several food distributors and suppliers, but only one seafood supplier has filed a claim for owed money in the restaurant chain’s bankruptcy petition so far.
Clackamas, Oregon, U.S.A.-based Pacific Seafood has filed a claim of USD 1,938.25 (EUR 1,782) in U.S. Bankruptcy Court in Orlando, Florida, U.S.A.
Other seafood industry creditors that could follow suit include Ocean Beauty, the Ocean Seafood Depot, Red Chamber Co., Luke's Lobster, the Seafood Nutrition Partnership, Star Lobster Seafood Market, Blue Star Foods, Devi Fisheries, The Fish Guys, and ID Seafood, as well as former minority owner Thai Union Group.
The financial burden of missed Red Lobster payments, though, is steepest for food distributor Performance Food Group (PFG) – Red Lobster’s largest creditor at USD 24.4 million (EUR 22.4 million) – and its subsidiary, the Kenneth O. Lester Company.
With other seafood industry players concerned about the distributor’s financial health, credit reporting and business management firm SEAFAX attempted to reassure the sector in a new notice.
“SEAFAX reaffirms its recommended credit appraisal for PFG and Kenneth O. Lester Company,” the firm said. “PFG’s liquidity compared to near-term debt obligations is healthy, as the company has a reasonable amount coming due – USD 275 million (EUR 253 million) in 2025 out of its USD 3.22 billion (EUR 3 billion) total debt.”
As of 24 May, the company's market capitalization was approximately USD 10.91 billion (EUR 10 billion), SEAFAX noted, and as of 30 March 2024, PFG had maintained strong liquidity with combined cash and credit facility availability of USD 2.94 billion (EUR 2.7 billion) and generated USD 956.7 million (EUR 879 million) in cash from operations, with a free cash flow of USD 712.3 million (EUR 655 million).
At the end of fiscal year 2023, PFG reported that none of its customers made up more than 10 percent of its sales or accounts receivable, according to SEAFAX.
As for Red Lobster’s former minority owner, more information has come to light on the level of Thai Union’s involvement in the management and operations of Red Lobster, following current Red Lobster CEO Jonathan Tibus alleging in bankruptcy court documents that Thai Union exerted “outsized influence on the company’s shrimp purchasing.”
“In apparent coordination with Thai Union and under the guise of a ‘quality review,’ [former CEO Paul] Kenny made a series of decisions that eliminated two of the company’s breaded shrimp suppliers, leaving Thai Union with an exclusive deal that led to higher costs for Red Lobster,” Tibus said.
Thai Union denied the allegations in a statement to SeafoodSource.
“We are aware of the meritless allegations in the bankruptcy court pleadings and look forward to a full representation of the facts,” Thai Union said. "We are confident that a court-supervised restructuring process will allow Red Lobster to address its financial obligations and restructure its business to realize its long-term potential in a more favorable operating environment.”
However, separate reports have claimed that Thai Union had extensive involvement in Red Lobster’s operations. For instance, CNN reported Thai Union installed some of its own executives by 2022, and dozens of veteran Red Lobster leaders “with deep knowledge of the brand and restaurant industry were fired or resigned in rapid succession.”
Additionally, Thai Union CEO Thiraphong Chansiri visited Red Lobster headquarters in Orlando in 2022, bringing along a design consultant who determined that the restaurant chain’s executive offices were ill-equipped for use, one former Red Lobster executive told CNN. The offices sat empty soon after the consultant’s review.
While creditors are determining when to file claims and disputes between the chain and Thai Union roll on, a former Red Lobster employee in New Jersey has filed a class action lawsuit in the U.S. District Court in Orlando on 17 May, with an attorney submitting a petition on 27 May for that lawsuit to be part of the U.S. Bankruptcy Court proceedings against Red Lobster.
Plaintiff Donna Lowe said that Red Lobster conducted a mass layoff on 14 May but did not provide the required 60 days prior written notice under the WARN Act – a 1988 U.S. labor law aimed at protecting employees, their families, and communities from unexpected and sudden mass employment terminations.
The suit “seeks compensation for wages and benefits that ought to have been paid during the warning period,” the complaint stated.
Red Lobster, for its part, is assuring customers that remaining stores are open and operating as normal.
“Filing for bankruptcy does not mean we are going out of business,” Red Lobster said in a recent social media post. “In fact, it means just the opposite. It is a legal process that allows us to make changes to our business and our cost structure so that Red Lobster can continue as a stronger company going forward.”
