By: Marisa Herman Associate Editor
IPIC movie-goers will not notice any changes as the luxury theater company initiates Chapter 11 Bankruptcy proceedings.
“For us, it’s business as usual,” IPIC founder and CEO Hamid Hashemi told the Delray Newspaper. “Theaters are open and operational. Everything is business as usual for us and our guests.”
The news to file for Chapter 11 broke just a few days after a filing with the Securities and Exchange Commission stated the company failed to make a $10 million interest payment due in July to the Teachers’ Retirement System of Alabama, a pension fund for Alabama’s teachers.
The filing stated that the company has $204 million of debt under a credit line offered through the pension fund and the company only had $2.2 million in cash.
The pension company RSA holds 39.2 percent of IPIC’s stocks, according to the filing. The stock traded at just $1 once the release went out at the end of July.
Under Chapter 11, the company will seek approval of either a sale or a reorganization plan and hopes to emerge with a healthy balance sheet and new capital structure.
“The team remains intact,” Hashemi said. “The same people will operate the business.”
The current management will work alongside the company’s restructuring advisors. Operations will be supported by debtor-in-possession (DIP) financing provided by the Retirement System of Alabama.
IPIC anticipates that the restructuring process will conclude in 90-120 days from when the news broke on Aug. 5.
While the proceedings are underway, Hashemi said the plan to move IPIC’s corporate headquarters to Delray is still on.
“The move to Delray is still continued as planned,” he said.
The goal was to move in September, but the bankruptcy news may push the date back, he said.
Plans to add a restaurant to the Delray location are still moving forward, Hashemi said.
“Nothing is changing,” he said. But the request for the restaurant was removed from a recent city agenda.
The Delray location is not owned by the LLC that is seeking bankruptcy protection. The property was conveyed to Delray Beach 4th and 5th Avenue, LLC. All agreements between that LLC and the city and city’s CRA are still in effect.
The financials issues do not stem from operations, but a “balance sheet problem,” he said.
In a news release, Hashemi said the company’s need to restructure resulted from several factors.
“IPIC was the first and only company building luxury theaters just 10 years ago which led to double digit growth year over year before the industry took notice,” he said in the release. “IPIC’s business plan called for building 25 locations in 4 to 5 years. Delays in development cycle combined with the high cost of capital depleted IPIC’s available resources before the company was able to reach critical mass and become self-funded.”
He also points out delays related to the Delray location resulted in unforeseen costs and a significant slowdown in circuit-wide development and new grand openings.
“The decision to commence a Chapter 11 case to pursue a comprehensive restructuring was not taken lightly but is necessary to accomplish our long-term goals and secure the company’s future,” he said.
Pachulski Stang Ziehl & Jones LLP is serving as legal counsel, Aurora Management Partners is serving as financial advisor, and PJ Solomon is serving as investment banker to the company.