The seafood restaurant chain has been weighed down by its leases as well as its unlimited shrimp offering, sources said. Red Lobster is also facing a 13.65% term loan maturity in 2026, according to TCW Direct Lending's filings.

Its lenders are bracing for a restructuring and the prospect of taking control of the company as equity value spiraled, sources said.

In January, Thai Union announced that it’s planning to exit its minority stake in Red Lobster as the restaurant chain brought prolonged financial drag due to the pandemic, higher interest rates and cost environment. Thai Union also said it will record a roughly $530m impairment charge on its investment in Red Lobster in the fourth quarter ended 31 December.

One of the main issues comes from Red Lobster’s Ultimate Endless Shrimp offering, according to Thai Union executives during the third quarter earnings call. While the $20 promotion boosted restaurant traffic during Q3 — historically a quieter season — it also drove losses as demand was heavier than expected.

“Of course, since then, we have been adapting our policy, we have been increasing our prices from $20 to $22 and then $25,” Ludovic Regis Henri Garnier, group chief financial officer at Thai Union, said during the call.

Red Lobster posted THB 395m of operational losses in Q3 23, worsening year-over-year from a loss of THB 339m.

To turn things around, Red Lobster recently engaged Alvarez & Marsal as chief restructuring officer, sources said. The company has also been exploring options with the help of Guggenheim and AlixPartners, they said.

Representatives at Red Lobster, Thai Union, Hilco and A&M didn’t respond to requests for comment. Guggenheim and Alix declined to comment.