Chuck E. Cheese Files for Chapter 11 Bankruptcy Due to COVID-19-Related Financial Challenges

Green Image With Text Chuck E Cheese Bankruptcy

[July 8, 2020] Popular children’s party venue and pizza chain, Chuck E. Cheese, joins a growing list of companies filing for bankruptcy due to economic issues stemming from the coronavirus pandemic. On June 25, parent company CEC Entertainment filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas. David McKillips, CEO of CEC Entertainment said, “[t]he 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.”

After 43 years of providing entertainment for families, Chuck E. Cheese accumulated unprecedented losses. According to Matthew Barr, attorney for CEC, CEC has $1 billion in debt and lost 90% of its business due to the coronavirus pandemic. At the start of the pandemic in March, over 700 Chuck E. Cheese and Peter Piper locations were forced to close. Many of CEC’s 15,000 employees were furloughed, and CEC had to make severe cost-cutting measures including suspending discretionary funding and reducing capital expenditures. Although some locations kept their kitchens opened, the sales were not sufficient to recover from the pandemic losses. CEC even registered a new name “Pasqually’s Pizza & Wings” during the pandemic to try and boast pizza-delivery sales, to no avail.

Initially, landlords were willing to grant rent concessions, but as the pandemic stretched on that was no longer the case. Landlords started to padlock doors and began eviction proceedings. CEC hopes to use Chapter 11 bankruptcy to negotiate with creditors and debtors to continue its reopening plan. Due to difficulties with landlords, CEC has permanently closed 34 locations. Currently, CEC has reopened 266 of its stores and plans to reopen more as federal, state, and local regulations allow.

U.S. Bankruptcy Judge Marvin Igur states a desire to help the business survive, “[i]t’s going to be my intent to work hard and try and bring the parties into consensus and agreement so these companies can be saved.” Judge Igur has approved typical first-day motions including authorizing the debtor to use cash collateral to fund operations, authorizing the debtor to maintain customer programs such as gift cards, and authorizing the debtor to maintain their insurance policies and programs.

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 currently 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 before Judge Marvin Igur.

Related: Bankruptcy

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