A federal judge approved Ruby Tuesday’s bankruptcy plan, which will give ownership to secured lenders Goldman Sachs and TCW Direct Lending as part of a debt/equity swap.
The chain filed bankruptcy in October. Prior to filing, the restaurant and secured lenders entered a Restructuring Support Agreement that contemplated two options—proceed under ownership of the secured lenders or facilitate a sale of assets. After an extensive marketing process, Ruby Tuesday didn’t receive a topping bid, or a bid sufficient enough to satisfy obligations to its lenders, by the January 14 deadline. As a result, Ruby Tuesday pursued the debt/equity swap.
The plan was confirmed Thursday after the restaurant laid out an agreement to provide roughly $6 million to unsecured creditors.
As part of the deal, unsecured creditors will receive $3 million in cash, including an initial distribution of $2 million after the effective date of the plan and a second, final distribution of $1 million to be paid no later than March 31, 2022. The group will also receive a $2 million note at a 5 percent interest rate if paid in cash and 33 percent of Ruby Tuesday’s recovery from a credit card processing fee class action lawsuit, which should surpass seven figures.
The chain said in the court filing that it believes the financial and operational restructuring and other transactions reflected in the plan will position it well to “compete more effectively in the challenging casual-dining industry.”
When the casual-dining chain, which has lost nearly 500 stores in four and a half years, filed for Chapter 11 in October, it owed $43 million under its credit facility and about $19 million in unsecured debt.
The brand noted in its bankruptcy filing that it had to permanently shut down 185 of 421 company-owned stores. That left the brand with roughly 250 units worldwide. Ruby Tuesday had 724 units in May 2016.
The restaurant blamed its decline—which dates back to before the pandemic—on competitive fast-food and fast-casual brands, decreases in mall traffic, and increases in third-party delivery services.
The brand was public for 21 years until NRD Partners bought the restaurant in 2017 and took it private. At the time of the merger, Ruby Tuesday had 541 restaurants. In the following years, increasing pressures and a failing business model caused the chain to move out of compliance with certain financial covenants. To curb the fallout, Ruby Tuesday shuttered stores, sold and lease-backed restaurants, reduced corporate overhead by more than 45 percent, and ramped up its off-premises business.
But pressures persisted, and Ruby Tuesday entered default again in 2019 and 2020. The pandemic only exacerbated the issue, especially since more than 90 percent of sales came from in-store dining at the time. The chain was forced to furlough roughly 7,000 employees.
