Red Lobster shareholder guarantees up to $65M of company’s debt
Orlando-based Red Lobster is getting a financial boost from a major shareholder, Thai Union, amid a year of turnover in the restaurant chain’s top leaders.
Thai Union is providing “financial assistance” by guaranteeing part of Red Lobster Master Holdings’ credit facility, according to an Aug. 24 Thai Union document informing the Stock Exchange of Thailand of the move.
The aid will not be more than $65 million, or about 25% of the outstanding credit balance, according to the document.
Thai Union’s board approved the guarantee to “support and enhance” the company’s “liquidity management capabilities,” the document said. Thai Union is a Thailand-based seafood supplier whose brands include Chicken of the Sea.
John Gordon, a San Diego-based restaurant analyst, said “it’s a bad sign, but not a fatal sign” for Red Lobster.
Gordon said he suspects the privately held company has gotten into a “cash crunch.” He added restaurants across the country are struggling with lower profit margins due to higher food and labor costs.
He compared the move to young adults going to their parents for money, but they shouldn’t do that forever.
“The son or daughter, obviously, they’re pumped up for a while by that cash infusion from their parents, but the parents don’t want to keep sending money to their kids,” Gordon said. “Then it’s up to the kids to work their business better or get a second job or do whatever they have to do in order to make themselves more self sufficient.”
A representative for Red Lobster did not respond to a request for comment.
The help comes during a year when the 700-restaurant chain has seen turnover among its top executives after longtime leader Kim Lopdrup’s retirement last year.
Lopdrup’s replacement, Kelli Valade, resigned in April, eight months after taking over as CEO from Lopdrup last August. She quickly found a new job as CEO and president of South Carolina-based Denny’s.
David Schmidt, who started in March as the chief financial officer at Red Lobster, is leaving on Sept. 9 to become president of Keke’s Breakfast Cafe. Denny’s
bought Keke’s earlier this year, and Schmidt will report to Valade there.
Schmidt’s departure is not as big of a surprise because when a CEO leaves it creates an environment that is a “little unstable” for the staff brought in by that executive, said Kevin Stockslager, executive vice president and partner at St. Petersburg-based Wray Executive Search. His firm specializes in restaurant leadership searches but is not involved in Red Lobster’s hunt.
“This was a great opportunity for David to become the president of an emerging brand and join back up with Kelli,” he said.
He said Valade’s quick departure is less of a challenge if she left because of a bad fit with Red Lobster. It would be a bigger concern if she left because of organizational or financial issues at the company, he said.
“At this level for a large, wellknown brand … if there are public signs of financial troubles, that might take some great candidates out of the running,” Stockslager said. “For other candidates, though, that’s an exciting challenge to turn around a brand.”
Just like with NFL coaches, there are a finite number of CEO jobs in the restaurant industry, he added.
Red Lobster was sold by Orlando’s Darden Restaurants for $2.1 billion in 2014 to San Francisco’s
Golden Gate Capital. In 2016, Thai Union became a stakeholder in the seafood chain.
Thai Union and a group of investors acquired the rest of the company from Golden Gate Capital in 2020. The investor group in the deal was named Seafood Alliance and included key shareholders Rit Thirakomen, CEO and controlling shareholder of Thai chain MK Restaurant Group, and Paul Kenny, former CEO of Asia’s Minor Food.
Kenny, a Red Lobster board member, was expected to be a liaison between Red Lobster’s leadership and the board after Valade’s departure. The company has not provided any updates on the search for her successor.
The 2020 sale came amid concerns from outside analysts over a $355 million loan reaching maturity and while the coronavirus pandemic crippled much of the restaurant industry. Moody’s earlier that year cut Red Lobster’s credit rating to Caa1, defined as “poor.”
Red Lobster completed refinancing that debt in 2021, spokeswoman Nicole Bott told the Orlando Sentinel last year.
Before his retirement, Lopdrup had been at the helm since 2014 and had previously worked as Red Lobster’s president from 2004 to 2011 when it was owned by Darden.
In August 2020, amid the pandemic, Lopdrup said it was “the most challenging time Red Lobster has faced in our 52 years of operation.”