CEC Entertainment, Inc., a nationally recognized leader in family entertainment and dining, on June 24 disclosed that, in order to overcome the financial strain resulting from prolonged, COVID-19 related venue closures and position the Company for long-term success, CEC Entertainment and its domestic affiliates have filed for voluntary protection under Chapter 11 of the U.S. Bankruptcy Code. The Company expects to use the time and legal protections made available through the Chapter 11 process to continue discussions with financial stakeholders, as well as critical conversations with its landlords, to achieve a comprehensive balance sheet restructuring that supports its re-opening and longer-term strategic plans.
CEC franchised locations operate under separate legal and financial structures and are not included in the Chapter 11 filings.
As of June 24, 266 company-operated Chuck E Cheese and Peter Piper Pizza restaurant and arcade venues had safely re-opened, in accordance with all CDC, federal, state and local guidelines. Subject to ongoing negotiations with its landlords, the Company expects to maintain ongoing operations in these locations throughout the Chapter 11 process, providing dine-in, delivery and carry-out services, hosting birthday parties during dedicated hours, and supporting fundraisers and events in the coming weeks and months. The Company also plans to continue opening additional locations each week, steadily bringing more employees back to work.
“The Chapter 11 process will allow us to strengthen our financial structure as we recover from what has undoubtedly been the most challenging event in our Company’s history and get back to the business of delivering memories, entertainment, and pizzas for another 40 years and beyond,” said David McKillips, CEC’s Chief Executive Officer. “I am incredibly proud of what the CEC team has achieved over the past year as we launched the All You Can Play value gaming platform, expanded our remodel program and found new ways to engage with families while our venues were closed. I’m confident in the strength of our team and our world-class brands and look forward to more fully implementing our strategic plan as we put these financial challenges behind us.”
The Company has filed customary motions with the Bankruptcy Court intended to allow CEC to maintain operations in the ordinary course including, but not limited to, paying employees and continuing existing benefits programs, honoring guest gift cards, and upholding commitments under its franchising and licensing agreements. The motions are typical in the Chapter 11 process and CEC anticipates that they will be heard and approved in the first few days of the Chapter 11 cases.
CEC’s Chapter 11 cases will be heard in the United States Bankruptcy Court for the Southern District of Texas. Additional information, including claims information, can be found at https://cases.primeclerk.com/cecentertainment or by contacting Prime Clerk, the Company’s noticing and claims agent, at (877) 930-4313 (for toll-free U.S. and Canada calls) and (347) 899-4582 (for tolled international calls), or by emailing email@example.com.
Weil, Gotshal & Manges LLP is serving as legal counsel, PJT Partners is serving as financial advisor, FTI Consulting is serving as restructuring advisor, and Hilco Real Estate is serving as real estate consultant to CEC in connection with the Company’s Chapter 11 cases.
About CEC Entertainment
CEC Entertainment is a family entertainment and dining company that owns and operates Chuck E. Cheese and Peter Piper Pizza restaurants. As of Dec. 31, 2019, the Company and its franchisees operate a system of 612 Chuck E. Cheese restaurants and 129 Peter Piper Pizza stores, with locations in 47 states and 16 foreign countries and territories.
CEC Entertainment recorded a net loss of $28.92 million for the year ended Dec. 29, 2019, compared to a net loss of $20.46 million for the year ended Dec. 30, 2018. As of Dec. 29, 2019, the Company had $2.12 billion in total assets, $1.90 billion in total liabilities, and $213.78 million in total stockholders’ equity.
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As reported by the TCR on April 24, 2020, Moody’s Investors Service downgraded CEC Entertainment, Inc.’s corporate family rating to Caa3 from Caa1. The downgrade considers the likelihood that closure of on-premise dining, entertainment and arcade rooms at all company-operated Chuck E. Cheese and Peter Piper Pizza restaurant units will continue for longer than initially anticipated as well as the company’s announcement that it has established a board level restructuring committee which indicates increased default risk.
Also in April 2020, S&P Global Ratings lowered its ratings on Texas-based CEC Entertainment Inc. (CEC), including the issuer credit rating, to ‘CCC’ from ‘B-’. S&P said CEC faces significant operational headwinds due to the coronavirus pandemic and has about $215 million of 8% senior unsecured notes maturing in less than two years.