TCW Group has sharply reduced the value of an equity position in Red Lobster held through its Direct Lending VII vehicle, marking it down by 98% since acquiring the stake as part of the restaurant chain’s 2024 restructuring, according to a report by Bloomberg.
The report cites regulatory filings as showing that the holding, previously valued at $31m, has been written down over consecutive quarters to less than $1m, with the stake now worth approximately $761,000.
The asset manager gained ownership through a debt-for-equity swap after Red Lobster’s bankruptcy process, with loans extended by TCW and other lenders converted into shares as part of the restructuring.
Despite the significant erosion in equity value, the firm continues to carry around $56m of Red Lobster debt at par within the same fund, indicating expectations that the company can still meet its loan obligations. The debt balance has increased over time as interest has been capitalised rather than paid in cash.
The markdown highlights the ongoing challenges facing the casual dining chain, even as management pursues a turnaround strategy. Since emerging from bankruptcy, Red Lobster has introduced menu changes, expanded promotional offerings and sought to reposition the brand with a more premium in-store experience.
However, the company has continued to generate losses in most recent quarters, with legacy lease obligations weighing on profitability and limiting operational flexibility.
TCW’s Direct Lending VII vehicle, a business development company investing across both debt and equity instruments. The Red Lobster position represents one of the fund’s larger holdings, accounting for a notable share of net assets.
