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Law360 (October 28, 2020, 9:51 PM EDT) -- A Florida bankruptcy judge on Wednesday gave movie theater operator Cinemex Holdings USA Inc. the nod to solicit votes on its Chapter 11 plan as it moves toward a scheduled confirmation hearing next month.
During a hearing held virtually in continuation of another the day prior, U.S. Bankruptcy Judge Laurel M. Isicoff said she would sign off on Cinemex's Chapter 11 disclosure statement once some minor tweaks are made so the debtors can solicit creditor votes on the plan.
Attorney Robert J. Feinstein of Pachulski Stang Ziehl & Jones, representing a committee of unsecured creditors, told the judge that stakeholders had "a meeting of the minds" before the hearing and hashed out most issues with the disclosure.
Feinstein also said supplemental filings on the Chapter 11 plan will be filed in the coming weeks to clarify certain details. Those filings will clarify issues such as what contracts will be rejected or assumed by the bankruptcy estate, according to comments during the hearing.
Cinemex, which is jointly owned by Mexican companies Grupo Cinemex and Operadora de Cinemas SA de CV, and affiliates filed for Chapter 11 protection in April, citing government-mandated closures of theaters during the COVID-19 pandemic. Cinemex operates 41 upscale dine-in movie theaters in 12 U.S. states under the CMX Cinemas brand.
The company previously said it has laid off almost all of its 2,500 workers, leaving fewer than 20 employees to maintain the business. At the time of its bankruptcy filing, its monthly lease obligations were about $3.2 million in rent, plus an additional $700,000 in tax and insurance, according to case filings. The debtors hit Chapter 11 listing more than $100 million in debt.
While it was forced to shutter all of its theaters in mid-March due to the pandemic, Cinemex said in a statement that it had been dealing with revenue challenges for some time and that a restructuring would require changing the way those revenues are split among the theaters, their landlords and movie studios.
According to the statement, about 30% of the debtor's take is spent on lease obligations, while another 60% is sent back to the movie studios that largely depend on the theaters for distribution of their films. The status quo would not support the industry, the company said, and so it sought renegotiated deals with stakeholders.
During the bankruptcy, Cinemex has engaged in efforts to determine which of its theaters are or can be profitable, renegotiate leases with landlords and a revenue-sharing agreement with studios, according to the disclosure statement.
The disclosure, filed with the court right before Wednesday's late afternoon hearing, said the debtors have "filed motions to reject 18 of their 41 leases, and are engaged in, or have successfully completed, negotiations with the remaining landlords."
Cinemex's Chapter 11 plan "provides for a reorganization of the debtors as a going concern, with a reduced number of theaters to focus on profitable locations," the disclosure said.
Cinemex has also "determined that a restructuring of their business through an equity sale implemented through a Chapter 11 plan is the best way to maximize the value of the estates," according to the disclosure.
Cinemex is represented by Brett M. Amron and Jeffrey P. Bast of Bast Amron LLP, and Patricia B. Tomasco, Eric Winston and Juan P. Morillo of Quinn Emanuel Urquhart & Sullivan LLP.
The committee is represented by Robert J. Feinstein of Pachulski Stang Ziehl & Jones and Paul Steven Singerman of Berger Singerman LLP.
The case is In re: Cinemex USA Real Estate Holdings Inc. et al., case number 1:20-bk-14695, in the U.S. Bankruptcy Court for the Southern District of Florida.
--Additional reporting by Nathan Hale and Vince Sullivan. Editing by Alanna Weissman.
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