- A Delaware bankruptcy judge granted Ruby Tuesday a two-month rent payment deferral, or about $5.5 million, on Thursday after hearing the chain’s plan to provide landlords a cut of a $22.5 million retirement plan trust fund that was part of a top hat deferred compensation plan, according to Law360. Top hat plans are typically unfunded employer-sponsored plans provided to top executives.
- Ruby Tuesday’s counsel said that even though most of Ruby Tuesday’s restaurants have reopened, dining revenues are down 30%. The company is trying to turn around revenue, which decreased 80% when dining room closures began in March, and counsel said the chain cannot pay November rent without accessing its debtor-in-possession lender for the funds.
- The judge’s decision will give Ruby Tuesday some breathing room, especially as it works to whittle down the $62 million it owes lenders, landlords and suppliers. Once it emerges from bankruptcy, the casual chain believes it will have between 175 and 200 restaurants, which could decrease its operating costs.
The liquidation of the trust fund won’t impact everyday retired employees, but it comes on the heels of news that the company previously instructed a bank to stop paying pensions during the summer, declaring insolvency in early September. Even before it declared bankruptcy, it closed over 150 restaurants, some of which didn’t notify employees.
Ruby Tuesday's original Chapter 11 filing said it owed $62 million to lenders, landlords and suppliers. While the company said it plans to restructure its debt with a debt-for-equity swap with lenders, it will also consider a sale of its operating assets with lenders serving as stalking horse bidders. A sale might be difficult, especially since a similar bankrupt chain, California Pizza Kitchen, was unable to draw a buyer during a court-supervised auction in October.
At the same time, Ruby Tuesday plans to use the funding from the trust as an estate asset in bankruptcy. This plan was enough to persuade landlords to drop previous objections to the proposal with $2.74 million to be set aside from liquidating the trust.
While many restaurants chains and franchisees have declared bankruptcy in the wake of the pandemic, TooJay's, which was one of the first to file Chapter 11 in April, emerged from bankruptcy with a new owner in September, according to Restaurant Business. If Ruby Tuesday continues to push forward through the proceedings, it could very well come back a stronger company, especially if it leans into its growing off-premise business further.