UPDATE: June 26, 2020: CEC Entertainment filed a petition with the U.S. Southern District of Texas bankruptcy court on Thursday to waive 45 leases in closed or underperforming locations. These locations were already closed and are currently vacant. Of these, 27 were closed due to COVID-19, four were closed due to lockouts, three were closed as a result of expired leases, and 11 were permanently closed before the coronavirus shutdown. The closed locations, which include 35 Chuck E. Cheese units and 11 Peter Piper Pizza restaurants, are in 24 states.
- CEC Entertainment, parent company of Chuck E. Cheese and Peter Piper Pizza, filed for voluntary Chapter 11 bankruptcy protection Thursday, according to a press release. The company said it had between $ 1 billion and $ 10 billion in liabilities on file. He plans to use the time and legal protections to continue his discussions with financial players and its owners to work on a restructuring of the balance sheet that will facilitate the reopening and its long-term strategic plans. The filing has no impact on CEC franchised establishments, including 83 national establishments and 103 international establishments until December 29, 2019.
- As of June 24, 266 company-operated Chuck E. Cheese and Peter Piper Pizza stores have reopened. The company plans to maintain operations at these locations during the bankruptcy process, providing dinner, delivery and delivery, hosting birthday parties during dedicated hours, and supporting fundraisers and events in the weeks and months to come. The company plans to open more locations each week.
- During the bankruptcy process, the company will pay employees and continue existing benefit programs, honor guest gift cards, and honor commitments under franchise and license agreements.
While nearly half a dozen companies have declared bankruptcy since the start of the pandemic, CEC Entertainment is the largest, according to Catering. Le Pain Quotidien FR, FoodFirst Global Restaurants, Sustainable restaurant operation and Toojay’s filed for Chapter 11 bankruptcy in recent months. Fresh garden restaurants ceased operations after filing for Chapter 7 bankruptcy in May. National Restaurant Association predicting restaurant industry to lose $ 240 billion by the end of the year, it is likely that these are only the first among many others.
CEC Entertainment, which saw its sales plummet after being forced to close all its dining rooms following state decrees, hired advisors in May to help it explore its options after creating a restructuring committee within its board of directors in April. In early June, CEC Entertainment was would work with lenders to raise money to help it avoid bankruptcy. The company was facing a quarterly payment of $ 1.9 million on loans owed at the end of the month. The timing of bankruptcy means he might have more time to work with creditors to reorganize his debt.
A a handful of potential buyers has also reportedly expressed interest in the business and bankruptcy could make the business with a restructured balance sheet more attractive to buyers. The record did not indicate that the chain was preparing for a sale, but the decision is not unknown. Perkins & Marie Callender’s, for example, filed for Chapter 11 bankruptcy eliminate liabilities before the sale of its subsidiaries.
Filing for bankruptcy may be the only surefire way for the company to reduce its $ 1 billion debt. CEC parent company Queso Holdings and majority shareholder Apollo Global attempted a merger deal with Leo Holdings last year that would have made CEC public and reduced debt by $ 300 million, but the case failed. Bankruptcy will also have the option of withdrawing underperforming locations, reduce overall administrative expenses and allow it to refocus on high-performance stores.
Without all this debt, the company will be able to refocus on its turnaround strategy, which includes a remodeling program, All you can play, a loyalty program and a game app and national delivery. These initiatives have helped the company increased its sales by 2.7% in 2019. Although it also increased its revenue by almost 2% in 2019 to reach $ 913 billion, it recorded a net loss of $ 29 million. with almost 10% of its income spent on interest payments. The company also plans to maintain operations and reopen dining rooms during the procedure, indicating that it doesn’t plan to go anywhere anytime soon.