Samut Sakhon, Thailand-based seafood company Thai Union Group has claimed that restaurant chain Red Lobster, of which Thai Union once owned a minority share, owes the group around USD 3.7 million (EUR 3.4 million) due to sudden changes in demand forecasts for shrimp.
An investigation to determine whether that claim is valid is now underway.
Thai Union said it built up an excess inventory of shrimp in late 2023 that was custom-produced for Red Lobster – worth around USD 22.9 million (EUR 21 million). Red Lobster worked with Thai Union to lessen that inventory, but Thai Union is still seeking USD 3.7 million in related costs due to fluctuations in anticipated demand.
However, attorneys for the Red Lobster Official Committee of Unsecured Creditors are investigating that claim based on reported allegations that Thai Union charged Red Lobster substantially more than market rates for shrimp.
“The Committee is conducting its own investigation to come up with its own conclusion,” Brad Sandler, attorney for the Official Committee of Unsecured Creditors, told SeafoodSource. "It may be a pretty strong claim – an insider charging meaningfully more than market rates for shrimp; when you talk about the [large] volume, it adds up, and the Committee is exercising its fiduciary duties to determine the strength and value of those allegations.”
The exact monetary recovery for all of Red Lobster’s general unsecured creditors is currently unknown, Debtwire said in a 21 July report, but the majority of secured debts filed should be eliminated with the proposed debt-for-equity deal recently announced that will see Fortress Credit as the chain’s buyer, according to Sandler.
Confirmation of the sale to Fortress Credit will take place at a hearing on 5 September at U.S. Bankruptcy Court in Orlando.
Elsewhere in its post-bankruptcy recovery process, Red Lobster could not negotiate lease terms with landlords at seven of its U.S. restaurants and closed those locations – after closing nearly 100 stores soon after announcing bankruptcy in May.
The newly closed restaurants were located in Tuscaloosa, Alabama; Phoenix, Arizona; Monrovia, California; Greeley, Colorado; Clermont, Florida; The Villages, Florida; and San Antonio, Texas, per USA Today.
Red Lobster paid more than USD 190 million (EUR 175 million) in rent in 2023, per Restaurant Dive, and USD 64 million (EUR 59 million) of that went toward underperforming restaurants. Now, the company is looking to reduce unproductive spending across its operational portfolio, per Restaurant Dive.
It also aims to improve staffing and grow traffic and sales via promotions, such as through a recent partnership with rapper Flavor Flav.
After it emerges from bankruptcy protection, Red Lobster is projecting net sales of nearly USD 1.9 billion (EUR 1.8 billion) in fiscal year 2025, but a net income shortfall of USD 51.8 million (EUR 47.9 million) that year.
In fiscal year 2026, though, Red Lobster said it aims to produce USD 1.95 billion (EUR 1.8 million) in net sales and USD 2.1 million (EUR 1.9 million) in net income.
In fiscal year 2027, the projected gains are even greater, as Red Lobster expects net sales to jump to approximately USD 2 billion (EUR 1.8 billion), while net income will grow to USD 13.6 million (EUR 12.6 million).
According to Sandler, the fact that the company was able to negotiate leases with most of its landlords and only close an additional seven restaurants should be a promising sign to suppliers worried about the future of the chain.
“I think the company is going to do extremely well. We are cautiously optimistic that this company – Red lobster 2.0 – will continue to be around for many years to come,” Sandler said.
