Chuck E. Cheese Hits Ch. 11 Following COVID-19 Closures

By Vince Sullivan
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Law360 (June 25, 2020, 10:24 AM EDT) -- The parent company of children's entertainment destination Chuck E. Cheese filed for Chapter 11 protection in Texas after closing its hundreds of locations in response to COVID-19 business restrictions.

The parent company of Chuck E. Cheese has filed for Chapter 11 protection in Texas, the company said Wednesday. (Roberto Machado Noa/LightRocket via Getty Images)

According to a statement from CEC Entertainment Inc. CEO Dave McKillips late Wednesday, the company has reopened more than 300 of its arcades and pizza restaurants since the outbreak forced the closures, but said that the loss of revenue from the shutdown have strained its finances.

"While our team is excited to again roll out the red carpet for our guests and open more locations each week, it also became clear that decisive action would be necessary to address COVID-related financial challenges and best position our company to delight families and kids for generations to come," the statement said.

The bankruptcy filing is intended to wipe out some of the company's debt and allow it to emerge from bankruptcy as a stronger enterprise, McKillips said.

The Chapter 11 petition indicates that the company has about $2 billion in debt, including $215 million in unsecured note debt.

CEC intends to use the breathing spell of the Chapter 11 filing to continue negotiations with its creditors and, especially, its landlords in so it can complete a balance sheet restructuring that "supports its re-opening and longer term strategic plans," the company's statement said.

The debtor operates 612 Chuck E. Cheese locations as well as 122 Peter Piper Pizza restaurant locations in 47 states and 16 foriegn countries, according to its statement. Since local business restrictions have begun to roll back, CEC has reopened 266 of its company-owned facilities in the U.S. and Canada along with 15 franchises in the U.S. and 22 international franchises.

The company anticipates reopening more stores on a week-by-week basis as long as it can comply with federal, state and local regulations dealing with health and safety conditions, the statement said.

CEC's parent company, Queso Holdings Inc., is an affiliate of private equity firm Apollo Global Management LLC and is not a debtor in the Chapter 11 cases. A plan to launch an initial public offering last July with a $1.4 billion valuation for CEC was nixed at the last minute in an unfavorable market in the family entertainment sector.

Apollo acquired CEC in January 2014 when it took the company private in a $1.3 billion transaction.

CEC has filed a slate of typical first-day motions with the bankruptcy court, including requests to honor gift cards and other customer programs, pay the claims of critical prepetition vendors and suppliers, and maintain utility service and insurance programs.

An initial case hearing is scheduled for Friday before U.S. Bankruptcy Judge Marvin Isgur.

CEC is represented by Alfred R. Perez, Clifford Carlson, Matthew S. Barr, Ryan Preston Dahl and Scott Bowling of Weil Gotshal & Manges LLP.

The case is In re: CEC Entertainment Inc. et al., case number 4:20-bk-33163, in the U.S. Bankruptcy Court for the Southern District of Texas.

--Editing by Rebecca Flanagan and Adam LoBelia.

UPDATE: This story has been updated with additional details about the bankruptcy.

For a reprint of this article, please contact reprints@law360.com.

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