Ruby Tuesday emerges from bankruptcy “a healthier company”

The brand has closed nearly 500 stores in four and a half years.

Ruby Tuesday emerged from bankruptcy “a healthier business,” CEO Shawn Lederman said Wednesday. It is also significantly smaller.

Ruby Tuesday filed for bankruptcy protection on Oct. 7, a move that allowed it to get rid of its debts, the company said. This included leases of closed locations burdened by COVID-19. The brand said it will permanently close 185 corporate units. When the pandemic hit, Ruby Tuesday was forced to lay off 7,000 employees and reduce – at the figure above – its company-managed footprint from 421 restaurants to 236.

Today, there are 209 company-owned and operated Ruby Tuesday stores across the country. Lederman said he was emerging positioned “to be more efficient, competitive and stable for the future.”

Ruby Tuesday had 724 restaurants in May 2016. It was public for 21 years until NRD Partners bought it in 2017 and took it private. It was valued at $2.40 per share, or $146 million ($335 million if you include debt), and marked NRD Capital’s biggest move to date. At that time, Ruby Tuesday had 541 slots.

According to FoodserviceResults, Ruby Tuesday had $660 million in revenue in 2019, down 9% from 2018.

The company said Wednesday that Chapter 11 allowed it to “strengthen the brand’s commitment to its existing customers.” Meanwhile, it will also continue to build virtual delivery-only brands “to capitalize on its core strengths and grow its offsite business as part of the company’s long-term growth plan.”

“We would like to thank our employees, partners and creditors for contributing to the success of our reorganization plan and look forward to continuing to provide quality service to our customers and our communities for many years to come,” Lederman said.

Ruby Tuesday was advised on its reorganization by Pachulski Stang Ziehl & Jones LLP as legal counsel, CR3 Partners, LLC, as financial advisor, FocalPoint Securities, LLC, as investment banker, and Hilco Real Estate, LLC, as an advisor and lease restructuring consultant.

Before filing for bankruptcy in October, Ruby Tuesday and the secured lenders entered into a restructuring support agreement to explore two options: proceed under the ownership of the secured lenders or facilitate the sale of assets. Ruby Tuesday has not received a higher or sufficient offer to meet obligations to its lenders. Instead, he proceeded with a debt/equity swap.

This plan was confirmed in early February after Ruby Tuesday presented an agreement to provide approximately $6 million to unsecured creditors. He originally received approval to move forward with a sales process in November.

Unsecured creditors were to receive $3 million in cash, including a first distribution of $2 million after the plan’s effective date and a final second 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% interest rate if paid in cash and 33% of Ruby Tuesday’s recovery from a class action lawsuit over card processing fees credit, which is expected to exceed seven figures.

Ruby Tuesday owed $43 million under its credit facility and approximately $19 million in unsecured debt when it filed for bankruptcy.

The chain previously attributed increased competition from fast-food and fast-casual brands to its slowdown, as well as lower mall traffic and disruption of third-party delivery. COVID provided a faster level of pressure as the company enjoyed 90% of its business from the pre-virus dinner.

Its struggles over the past few years have forced Ruby Tuesday to no longer comply with certain financial covenants, leading to the closure of restaurants, the sale and leaseback of units, a decision to reduce the company’s overhead costs by over 45% and investments in off – commercial premises. Ruby Tuesday, however, defaulted to 2019 and 2020.

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