In a new opinion issued in the Chuck E. Cheese bankruptcy cases, In re CEC Entertainment, Inc., Case No. 20-33163 (Bankr. S.D. Tex.),1 Judge Marvin Isgur of the U.S. Bankruptcy Court for the Southern District of Texas ruled2 that CEC Entertainment, Inc. (“CEC”), the parent company of the Chuck E. Cheese pizza chain, could not defer its rent obligations due to ongoing COVID-19 disruptions beyond the initial 60-day period authorized by section 365(d)(3) of the Bankruptcy Code.  While CEC had initially sought rent relief with respect to dozens of its store locations, it was able to settle with the landlords for all but six locations in North Carolina, Washington, and California; the non-settling landlords continued to insist that CEC was required to pay rent despite the global pandemic and CEC’s bankruptcy filing.  In its December 14, 2020 opinion, the court agreed with these landlords and rejected each of CEC’s arguments for its proposed relief, including that: (1) sections 105 and 365 of the Bankruptcy Code authorized the Bankruptcy Court to suspend CEC’s rent obligations beyond the 60-day period included in Section 365(d)(3); (2) the COVID-19 pandemic—and related restrictions put in place by state and local governments—constituted a force majeure event under each of the six leases at issue; and (3) CEC’s inability to fully utilize the leased premises as a result of state and local restrictions on indoor dining and entertainment entitled CED to a “frustration of purpose” defense with respect to each lease.

Continue Reading Opinion of Interest – In re CEC Entertainment Inc.: COVID Disruptions Do Not Justify Additional Rent Deferrals Beyond Initial 60-Day Period Expressly Permitted by Bankruptcy Code

AMC Entertainment Holdings Inc. announced that it is exploring financing alternatives to address the financial strain on the company resulting from the COVID-19 pandemic, including an at-the-market sale of 178 million shares, reports The Street. This announcement comes after Walt Disney Co. announced that approximately 80% of its new content in 2021 would be

Business Insider reports that AMC Theaters recently sought to raise up to $844 million through stock sales to improve its financial condition, which has been substantially weakened due to restrictions on indoor gatherings put in place in response to the COVID-19 pandemic. AMC’s stock price took a major hit after Warner Bros. announced it would

Mayer Brown partners Sean Scott and Aaron Gavant and associates Tyler Ferguson and Alexander Berk discussed the United States Bankruptcy Court for the Southern District of Texas’ most recent decision arising out of the Ultra Petroleum Corp. bankruptcy case and its rulings that (1) make-whole premiums are allowed by the Bankruptcy Code under appropriate circumstances

CEC Entertainment, the parent company of kid-friendly and iconic “dinnertainment” restaurant and arcade chain—Chuck E. Cheese—sought and received Bankruptcy Court approval for three very unique settlement agreements, earlier this year, under which it will pay $2.3 million to three vendors to destroy roughly seven BILLION prize tickets –  i.e.,  enough tickets to fill approximately 65 forty-foot cargo shipping containers.1 The backlog was caused by Chuck E. Cheese placing orders for tickets at pre-COVID utilization rates, the resulting pandemic and rapid fallout in sales, and, most generally, Chuck E. Cheese’s efforts to transition from physical tickets to contactless transactions, like “e-Tickets.”2

Continue Reading The Costs of Destruction: Bankruptcy Court Authorizes Chuck E. Cheese to Spend Millions on Destruction of Prize Tickets

CNN reports that fast-casual dining chain Ruby Tuesday, Inc. filed for chapter 11 bankruptcy relief in the United States Bankruptcy Court for the District of Delaware on October 7, 2020. Ruby Tuesday reportedly plans to close approximately 45% of its locations as part of its restructuring efforts. [CNN; Oct. 7, 2020]

Bloomberg reports that the

Houston, TX-based oil services provider SAExploration Holdings Inc. has filed for chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas, reports the Wall Street Journal. SAExploration reportedly owes $6.8 million on a unsecured loan it received through the Paycheck Protection Program of the CARES Act. [WSJ; Aug.

In transactions reminiscent of the contentious JCrew “trap door” transaction of 2017, performance entertainment company Cirque du Soleil and travel booking company Travelport Worldwide Ltd. each recently obtained more favorable financing terms, in the face of increasing financial distress, by transferring certain valuable intellectual property rights into unrestricted subsidiaries (thus freeing those rights from their existing creditors’ liens) to be pledged as security for new loans.  Each company’s transfer has been disputed by certain existing creditors claiming that such actions violated the companies’ existing credit agreements; Travelport now has commenced a declaratory judgment action in New York state court to validate its transfer.

Continue Reading Cirque Du Soleil and Travelport Transactions Create Controversy

Reporting from Bloomberg indicates that Ascena Retail Group, the parent company of clothing brand Ann Taylor, has entered discussions with lenders concerning a potential bankruptcy filing. Ascena reportedly wishes to pursue a partial asset sale in bankruptcy, whereby it would sell certain of its brands to reduce its existing debt, while retaining several of its

The American Bankruptcy Institute reports that California Pizza Kitchen Inc. is seeking an out-of-court debt restructuring in an effort to avoid a chapter 11 bankruptcy. The company is reportedly seeking a $30 million bridge loan to allow it to work towards a debt restructuring over the next six months. Prior to the COVID-19 pandemic, California