Register, or Login to view the article
December 4, 2020 – The Court hearing the VIPC Holdings Liquidating (f/n/a VIP Cinema Holdings, Inc.) cases issued an order dismissing of the Debtors' Chapter 11 cases [Docket No. 418].
On September 29, 2020 and further to a request from the Debtors, the Court hearing the VIPC Holdings Liquidating (f/n/a VIP Cinema Holdings, Inc.) cases issued an order approving proposed procedures for dismissal of the Debtors’ Chapter 11 cases [Docket No. 383]. These cases were then effectively locked onto a dismissal path, with the actual order dependent on the Debtors’ completion of administrative tasks; most importantly the payment of professional fees. That order (ie this one) has now been issued.
In a motion requesting the approval of dismissal procedures (and ultimately dismissal), the Debtors stated [Docket No. 355], “When the Debtors commenced these chapter 11 cases…they expected to swiftly confirm and consummate their… Prepackaged Plan of Reorganization…which contemplated a comprehensive and consensual prepackaged reorganization of the Debtors’ businesses. However, as the Court is well aware, unforeseen circumstances have since led the Debtors down a markedly different path."
Background
On February 17, 2020, VIP Cinema Holdings, Inc. and four affiliated Debtors (“VIP” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 20-10345. At filing, the Debtors, a manufacturer of premium movie theater seating, noted estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn.
Subsequent to a May 2017 acquisition, the Debtors were 100% held by HIG Cinema Intermediate Holdings, Inc. which is an affiliate of H.I.G Capital ("H.I.G.").
Restructuring Support Agreement
[As reported at filing] The Debtors have executed a restructuring support agreement (the "RSA") with (i) a steering committee of First Lien Lenders representing over 66.6% of the Debtors' first lien facility, (ii) the Debtors' second lien lenders and (iii) the equity-holding affiliates of H.I.G.; which forms the basis for a consensual chapter 11 prepackaged plan of reorganization. The restructuring, as envisioned by the RSA, will eliminate approximately $178.0mn of long-term indebtedness, provide access to $20.0mn in new money to support the chapter 11 restructuring and go-forward operations, and maintain the Company as a going concern.
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filing (the “Declaration”), Stephen Spitzer, the Debtors’ Chief Restructuring Officer (and a Managing Director at Alix Partners LLP) detailed the events leading to VIP’s Chapter 11 filing.
The Declaration states: "Since the end of 2017…VIP’s revenues have significantly declined as the ‘penetration’ opportunity for premium recliners started to plateau and movie exhibitors, particularly the larger ones that comprised a major portion of the Company’s revenue, slowed down their renovation activities and construction of new locations. Other factors driving the Company’s recent revenue decline include increased competition in the luxury movie-theatre seating market, which has put a pressure on price, reduced capital investment spending by the Company’s major customers, due to overall poor stock price performance and investor push-back on debt load, and a longer lifecycle for the Company’s products than expected, prevented the Company from being able to ‘fill’ the headwinds from declines in new, first-time conversions.
As a result, in August 2019, VIP was unable to meet the maximum total leverage ratio…required by the Existing First Lien Credit Agreement…triggering an event of default… under the Existing First Lien Credit Agreement. To facilitate restructuring negotiations, on August 20, 2019, the lenders under the Existing First Lien Credit Agreement…entered into a forbearance agreement, restricting them from exercising their rights and remedies under the Existing First Lien Credit Agreement….As negotiations continued, the Forbearance Agreement was subsequently amended several times to lengthen the forbearance period, which currently expires on February 15, 2020."
Prepetition Debt
|
Type of Debt |
Description |
Maturity |
Approximate Amount Outstanding |
|
First Lien Term Loan Facility |
$165.0mn term loan commitment secured on a first lien basis by substantially all of the Company’s assets, equity interests of each subsidiary of Holdings (defined below), and real property. |
March 1, 2023 |
$144.4mn |
|
First Lien Revolving Facility |
$20.0mn revolving credit facility secured on a first lien basis by substantially all of the Company’s assets, equity interests of each subsidiary of Holdings, and real property. |
March 21, 2022 |
$20.0mn |
|
Second Lien Term Loan Facility |
$45 million term loan facility secured on a second lien basis by substantially all of the Company’s assets, equity interests of each subsidiary of Holdings, and real property. |
March 1, 2024 |
$45.0mn |
|
|
|
Total |
$209.0mn |
Structure Chart
About the Prepetition Debtors
According to the Debtors: "VIP Cinema is the leading designer and assembler of premium seating solutions for the global cinema industry. VIP serves cinema exhibitors, large and small, with a wide selection of seating products that are fully customizable and able to be configured for all auditorium layouts. The company sells both premium recliners and smaller, concentrated seats, to address all needs of exhibitors. In addition to its product development capabilities and nearly 100% on-time delivery track record, VIP also provides all aftermarket parts for its products, serving as a one-stop-shop for all seating needs throughout the life cycle."
Read more Bankruptcy News