THIS IS A CORRECTED VERSION OF THE PREVIOUSLY SHARED SUMMARY
WE HAD SOME TECHNICAL DIFFICULTIES AND
A DRAFT IN PROGRESS WAS SENT BEFORE IT WAS COMPLETED
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On February 18, 2020 (the “Petition Date“), VIP Cinema Holdings, Inc. (“VIP” or the “Company”), HIG Cinema Intermediate Holdings, Inc., VIP Components, LLC, VIP Cinema, LLC, and VIP Property Management II, LLC (collectively, the “Debtors”) each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.
The Debtors are represented by Ropes & Gray LLC and the Bayard Firm. The case has been assigned to the Honorable Mary F. Walrath. A hearing on the Debtors’ first day motions was held on February 19, 2020. A meeting to form the unsecured creditor’s committee has not yet been scheduled.
The Debtors comprise a multinational enterprise that is a manufacturer of luxury seating products for movie theatres. Based in New Albany, Mississippi, the Company was started in 2008 as a residential furniture manufacturer, moving into movie seating when its owner recognized an opportunity in the decline of movie-theatre attendance due to the rapid proliferation of alternative viewing experiences and introduced premium seating options as a way for theatres to increase revenue and profitability. VIP states it was amongst the first in the U.S. to introduce a premium, reclining movie theatre chair to replace existing low-profile, metal chairs. VIP first served as a key supplier to AMC Theatres, who experienced significant returns on investment for their renovated auditoriums. When other exhibitors noticed this success and engaged similar plans for their auditoriums, demand for premium recliners increased significantly and VIP became a supplier to other several other large theatre chains, initially throughout North America and later in Europe.
The Debtors cite both industry-wide and Debtor-specific headwinds such as market saturation, a continued rise in home/online streaming services, and increased competition, costs, and replacement-cycle expectations from theatres as underlying challenges. Also compounding VIP’s liquidity, in August of 2019, Regal Cinemas, Inc. (“Regal”) filed a complaint against affiliate VIP Cinema, LLC, alleging various causes of action. Although the Debtors dispute the complaint, they expect the cost and expense of defending could be millions of dollars.
In November 2019, the Debtors and key stakeholders agreed to an out-of-court restructuring transaction but, due to further reductions in seating orders from a key customer, the cash flow generated by the Company was not sufficient to support the proposed capital structure. Therefore, the parties commenced discussions of an in-court transaction, with stakeholders agreeing to a plan that would eliminate approximately $178 million of long-term indebtedness, provide access to $20 million in fresh capital to support the restructuring and go-forward operations, and maintain the Company as a going concern, preserving approximately 373 jobs globally (See Stephen Spitzer Affidavit in Support).
As of the Petition Date, H.I.G. Capital, LLC and H.I.G. Middle Market LBO Fund II, L.P. and other prepetition lenders are owed approximately $209 million of funded debt obligations. The Debtors’ unsecured obligations are unspecified but include vendor-related debts of at least $1.6 million.
The Debtors seek approval of a facility that will provide them with the necessary liquidity to fund business operations and administrative expenses during the cases. If approved, the Debtors will use the proceeds to honour employee wages and benefits, procure goods and services, and fund general and corporate operating needs and the administration of these cases. Moreover, the Debtors are that access will send a clear signal to the market that VIP’s operations can and will continue on a business-as-usual basis. The Debtors have proposed a thirteen-week cash-flow budget showing post-petition cash needs of $8,381,660.
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| Approximately $209 million. | |||||||||||||||||||||||||||||||
| Unspecified, but at least $1.6 million in trade debt. | |||||||||||||||||||||||||||||||
| FIRST DAY RELIEF FOR AUTHORIZATION TO PAY AND PAYMENTS | |||||||||||||||||||||||||||||||
| Interim Relief An amount not to exceed $85,000. | Final Relief Unspecified. | ||||||||||||||||||||||||||||||
| Interim Relief An amount not to exceed $90,000 in the aggregate. | Final Relief Unspecified. | ||||||||||||||||||||||||||||||
| Interim Relief An amount not to exceed $1,025,000. | Final Relief An amount not to exceed $1,350,000. | ||||||||||||||||||||||||||||||
| Interim Relief Total unspecified. Debtors seek authorization to honour any prepetition credit amounts of up to $50,000. | Final Relief Total unspecified. Debtors seek authorization to honour any prepetition credit amounts of up to $50,000 and to process any deposits in the ordinary course, estimated up to $4.3 million. | ||||||||||||||||||||||||||||||
| Employees: Approximately 373 (353 U.S./20 abroad) | |||||||||||||||||||||||||||||||
| Interim Relief An amount not to exceed $842,700.
No payment shall exceed the statutory cap of $13,650. | Final Relief An amount not to exceed $942,700.
No payment shall exceed the statutory cap of $13,650. | ||||||||||||||||||||||||||||||