Irving-based CEC Entertainment, the parent company of Chuck E. Cheese and Peter Piper Pizza, filed for Chapter 11 bankruptcy Wednesday in Houston federal court.
The filing comes two months after The Texas Lawbook and the Dallas Business Journal reported that the company had retained Weil, Gotshal & Manges to explore a possible restructuring. According to court papers, Houston Weil partner Alfredo Pérez is leading the restructuring for CEC and 16 other affiliated companies.
Other Texas-based Weil lawyers on the bankruptcy include Houston restructuring associate Clifford Carlson and Dallas bankruptcy litigators Paul Genender, Amanda Pennington Prugh, Jake Rutherford and Jenae Ward. Lawyers from Weil’s New York office are also playing a role on the restructuring side.
The Chuck E. Cheese bankruptcy appears to be a break from Pérez’s regularly scheduled programming in the oil patch. The University of Chicago Law School alum has recently appeared in headlines for his involvement in the corporate restructurings of multiple energy companies, including Unit Corp., Gavilan Resources and McDermott International.
CEC’s chief legal officer is Rudy Rodriguez, who has been with the company for more than five years. Rodriguez first joined CEC as its general counsel, but in March 2018, his role evolved to also overseeing the company’s human resources department. He also serves as an executive vice president and corporate secretary. Before joining CEC, Rodriguez spent two years in J.C. Penney Corp’s legal department, and before that, was at the now-defunct Dallas litigation boutique formerly known as Gruber Hurst Johansen Hail Shank.
CEC’s voluntary petition indicates that Rodriguez has also hired the Dallas office of FTI Consulting to serve as the company’s financial advisor in the restructuring. PJT Partners in New York is serving as the company’s investment banker, while Hilco Real Estate is serving as its real estate advisor.
According to the bankruptcy petition, CEC is looking to wipe nearly $2 billion in debt off its balance sheet. The debt exceeds the company’s assets ($1.74 billion) by roughly $255 million. CEC’s creditors range between 5,000 and 10,000.
In a company statement, CEC cited ongoing financial struggles created by the COVID-19 pandemic. As of Wednesday, 266 company-operated Chuck E. Cheese and Peter Piper Pizza restaurant and arcade venues had re-opened. The statement said the company’s franchised operations are not included in the Chapter 11 reorganization.
Just like about every other major corporate bankruptcy, CEC’s largest unsecured creditor is Wilmington Trust, which holds $215 million in company notes. National Retail Properties, which holds some of CEC’s leases, is the second largest unsecured creditor, and is owed $2.79 million.
Court papers filed Thursday said CEC currently operates approximately 555 venues and has 186 venues under franchise arrangements. The company operates across 47 states and 16 other countries.
The case has been assigned to U.S. Bankruptcy Judge Marvin Isgur of the Southern District of Texas. Houston DOJ lawyer Stephen Douglas Statham is representing the U.S. Trustee, although court filings said a trustee is yet to be appointed.
The case number is 20-33163 in the U.S. Bankruptcy Court for the Southern District of Texas’ Houston division.
Some Film With Your Pizza
Weil wasn’t the only law firm to see some action on the SDTX bankruptcy docket this week. On Monday, Matthew Cavenaugh of Jackson Walker’s Houston office filed a Chapter 15 petition on behalf of Paris-based Technicolor S.A.
This isn’t just any bankruptcy either; it happens to be the reorganization of the company that helped bring color to theater screens that is considered a legacy name from Hollywood’s Golden Age.
Today, Technicolor S.A. is the parent company behind major visual effects studios and post-production houses. Technicolor handled the VFX and animation for the reboot of “The Lion King” and owns subsidiaries that worked on some 300 series including HBO’s popular “Big Little Lies.”
But the century-old company has undergone years of financial troubles and reinvention to adjust to the digital age of 21st century film. The latest blow was the coronavirus pandemic, which the company said in bankruptcy court filings has caused a disruption to movie releases and production timelines as well as the manufacturing of consumer electronics — another key component to Technicolor’s business model.
Technicolor filed its Chapter 15 voluntary petition in Houston federal court as a parallel foreign proceeding to the company’s primary corporate restructuring that is underway in a French court. The Houston case is a means to ensure the French restructuring plan is followed with respect to its U.S. operations.
According to court filings, Technicolor’s U.S. subsidiaries are currently buckled with about $477.8 million in debt.
Like a slew of previous reported bankruptcies, Cavenaugh, a partner in Jackson Walker’s Houston office, is co-counseling the Chapter 15 proceeding with non-Texas lawyers from Kirkland & Ellis. The Jackson Walker-Kirkland duo is also currently working on the corporate restructurings of J.C. Penney, Ultra Petroleum, Stage Stores and Neiman Marcus. They’re also rumored to be handling the anticipated bankruptcy filing of Chesapeake Energy Corp.
Other Jackson Walker lawyers on the Technicolor bankruptcy are Austin partner Jennifer Wertz and Houston associate Veronica Polnick.
The case number is 20-33113 in the Houston division of the U.S. Bankruptcy Court for the Southern District of Texas. It has been assigned to U.S. Bankruptcy Judge David Jones. The judge will consider whether to recognize the French restructuring as the foreign main proceeding during a July 31 hearing.
The Chuck E. Cheese and Technicolor bankruptcies arrive at the mercy of the rapidly-spreading coronavirus pandemic, which saw 36,880 new cases in the U.S. on Wednesday and is causing state leaders, including Texas Governor Greg Abbott, to reevaluate the economy re-openings of their states. Gov. Abbott issued an executive order Thursday that paused the reopening of businesses and suspended elective procedures in hospitals in Dallas, Houston, Austin and San Antonio.