Ruby Tuesday is bankrupt

[TENNESSEE] Ruby Tuesday, the struggling casual restaurant chain, filed for bankruptcy Wednesday, just three years after a private-equity buyout.

The Chapter 11 filing in Delaware follows a tentative deal signed last month to hand the business to certain secured lenders, according to a court declaration. The document listed units of TCW Group and Goldman Sachs Group in that category.

The chain has been negotiating with landlords to curtail or delay millions of dollars in rent payments as it copes with sliding sales, worsened by the pandemic. Chapter 11 allows a company to stay in business while it works out a turnaround plan.

NRD Capital Management bought Ruby Tuesday in 2017 for about US$335 million, when the already-struggling chain operated more than 500 restaurants. But shifting consumer tastes - like booming fast-casual spots and declining mall traffic - kept hurting Ruby Tuesday, which began tripping loan covenants a year after the buyout, according to court papers.

Ruby Tuesday closed weak locations, sold and leased-back 189 restaurants and slashed corporate overhead by nearly half, court papers show. The company is now operating 236 dining rooms and doesn't intend to reopen 185 locations that closed during the pandemic.

The remaining restaurants will operate as usual while the firm attempts to recover "from the unprecedented impact of Covid-19," chief executive officer Shawn Lederman said in a statement. Liabilities are estimated between US$100 million and US$500 million, according to the court filing.

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Founded in 1972 in Knoxville, Tennessee, the company counts about 7,300 employees, according to a court declaration. Most of them have been furloughed because of the Covid-19 outbreak.

Ruby Tuesday's struggle against the pandemic is similar to that of other restaurant chains, many of which were already hurting amid changing tastes, heavy debt loads and declining investments from private equity sponsors.

BLOOMBERG