Golden Gate Capital exited its investment over the summer.
Red Lobster, which Golden Gate Capital exited in August after agreeing to sell its remaining equity stake to a consortium of existing brand investor Thai Union and Red Lobster management, executed an exclusivity agreement to refinance a loan that comes due in several months, sources told Debtwire. The deal was struck and the loans taken out at par.
A company spokesperson told Debtwire, “Red Lobster has completed its debt refinancing, entering into a new term loan agreement with Fortress Credit Corp. and a working capital facility with Wells Fargo Capital Finance, Financial terms of the loan agreement are not being disclosed. Guggenheim was the sole arranger.”
To go forward with the August ownership change, Red Lobster secured consents from lenders to waive both the change of control and going-concern language under the loan document, Debtwire said. This paved the way for Golden Gate to unload its investment. The firm took Red Lobster private in 2014 from Darden through a $2.1 billion deal.
In return for approvable, Debtwire reported, lenders received $65 million pro rata paydown at par on the $380 million LIBOR plus 525 basis points (1 percent floor) term loan due July 2021. The loan was quoted 98/99.333, compared to 93.59/95.5 on 26 October and 70.25/76.75 on 14 April, according to Markit.
Earlier in the year, Red Lobster began exploring strategic options after facing “unprecedented challenges resulting from the COVID-19 pandemic.”
As of February 23, Red Lobster had about $216 million of unrestricted cash, the report said.
Red Lobster had nearly $2.5 billion in U.S. sales in 2019—a 2.1 percent year-over-year decline. It also dipped to 670 domestic restaurants from 675, according to FoodserviceResults. Average-unit volumes fell to $3.494 million from $3.550 million. The sales figure put Red Lobster at No. 10 in this year’s FSR 50 ranking of the country’s top-grossing full-service chains, ahead of The Cheesecake Factory, LongHorn, and Red Robin.
Red Lobster’s new investor group is labeled “Seafood Alliance,” and include shareholders Paul Kenny and Rit Thirakomen. Kenny was the CEO of Minor Food, one of Asian’s largest restaurant companies with 2,000-plus outlets in 27 countries under The Pizza Company, The Coffee Club, Riverside, Thai Express, Benihana, Bonchon, Swensen's, Sizzler, Dairy Queen, and Burger King brands. Thirakomen is the chairman, CEO, and controlling shareholder of Thai restaurant chain MK Restaurant Group.
The other, Thai Union, made a $575 million minority investment in Red Lobster five years ago. The company, known for its “Chicken of the Sea” product, was involved with Red Lobster on the supplier level for more than 20 years. Thai Union added two representatives to the Red Lobster board of directors in 2016 as well.
Financial terms of the August transaction were not disclosed, but Thai Union is a publicly traded global seafood supplier with an enterprise value of about $4 billion.