Red Lobster is facing the “most difficult period” in its history during the coronavirus pandemic, CEO Kim Lopdrup said, along with outside analysts worried about an impending loan of $ 355 million the company must 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, who earlier in the year downgraded the company’s credit rating to Caa1. defined as “poor”.
The upcoming financial events mean that it is “essential to fix the balance sheet,” said John Gordon, San Diego-based foodservice analyst.
“Most casual restaurant operations have had a very difficult time and most will struggle for some considerable time in the future,” Gordon said. “I hope Red Lobster doubles wherever and whenever it can in terms of takeout and delivery.”
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 virus-triggered mandatory restaurant closures in March and restrictions such as limited capacity in place even after most of the company’s locations reopened their dining rooms.
“Our priority is to ensure that Red Lobster is one of the survivors of this crisis,” said Lopdrup. “While there are many unknowns, I am optimistic about the future of Red Lobster. We have a great team and I am proud of the flexibility with which they have responded to a rapidly changing situation.
Red Lobster offers free shipping for orders over $ 30 placed on the company’s website or app Monday through Thursday, Lopdrup said.
Inside restaurants, Lopdrup said employees wear face masks and have their temperatures checked when they enter work. Other security measures include hand sanitizer stations, single-use menus, and pay-to-table technology.
Moody’s also gave Red Lobster a negative outlook.
“Over the next 12 to 18 months, we think things can get tougher,” said Bill Fahy, vice president and senior credit manager 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 after 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 unearmarked cash in February, according to the Moody’s report.
But it is unclear to what extent the pandemic has affected the red lobster, as private companies are not required to release financial information.
“We expect further deterioration in results and credit metrics as the various restaurant dining restrictions across the Red Lobster restaurant base in an effort to control the spread of the coronavirus pandemic persist. “Moody’s said in its report on Red Lobster. .
Orlando, Florida-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.
According to an article in Yahoo! Finances and other reporting.