Loan payment

‘The toughest time’: Big loan payment looms for Red Lobster amid pandemic | Business, finance and technology

Red Lobster is facing the “toughest time” in its history during the coronavirus pandemic, CEO Kim Lopdrup said, as outside analysts worry about an impending $355 million loan that the company has to wait until next summer.

The private seafood chain of more than 700 restaurants has a $380 million term loan, with more than $355 million outstanding, maturing next July, according to a June report from Moody’s, which more early in the year reduced the company’s credit rating to Caa1, defined as “poor”.

Upcoming financial events mean it’s “critical to repair the balance sheet,” said San Diego-based restaurant analyst John Gordon.

“Most casual dining operations have had a very tough time and most will have a tough time for a considerable time in the future,” Gordon said. “I hope Red Lobster doubles down wherever and however they can in terms of takeout and delivery business.”

Lopdrup said in a statement that this was “the most difficult time Red Lobster has faced in our 52 years in business.”

He noted the mandatory closure of restaurants in March caused by the virus and restrictions such as limited capacity in place even after most of the company’s sites reopened their dining rooms.

“Our priority is to make sure Red Lobster is one of the survivors of this crisis,” Lopdrup said. “Although there are many unknowns, I am optimistic about the future of Red Lobster. We have a great team and I’m proud of how quickly they reacted to a rapidly changing situation.

Red Lobster is offering free shipping on orders over $30 placed through the company’s website or app Monday through Thursday, Lopdrup said.

Inside restaurants, Lopdrup said employees wear masks and have their temperatures checked on their way to work. Other safety measures include hand sanitizer stations, single-use menus and pay-at-the-table technology.

Moody’s also gave Red Lobster a negative outlook.

“Over the next 12 to 18 months, we think things may get tougher,” said Bill Fahy, vice president and chief credit officer at Moody’s.

Refinancing the loan that matures next summer is an option for the company, Fahy said, but it won’t necessarily be easy.

“The ability to refinance things post-COVID, especially in the casual dining world, is much more difficult,” he said.

Red Lobster, which has generated about $2.4 billion in annual revenue in recent years, had about $216 million in unrestricted cash as of February, according to Moody’s report.

But it’s unclear how much the pandemic has affected Red Lobster, as private companies aren’t required to release financial information.

“We expect further deterioration in earnings and credit metrics as the various in-restaurant dining restrictions across Red Lobster’s restaurant base in an effort to control the spread of the coronavirus pandemic persist. “said Moody’s in its report on Red Lobster. .

Orlando, Fla.-based Darden Restaurants sold Red Lobster in 2014 to San Francisco’s Golden Gate Capital for $2.1 billion. Thai Union took a stake in Red Lobster in 2016.

A representative for Golden Gate Capital said the company declined to comment for this story.

Another restaurant chain, California Pizza Kitchen, which was acquired by Golden Gate in 2011, filed for Chapter 11 bankruptcy in July, according to a Yahoo! Finance and other reporting.