Company files Chapter 11, drops non-core, failing biz
NEW YORK — Struggling Planet Hollywood Intl. on Tuesday announced plans to file for Chapter 11 bankruptcy during a restructuring it hopes will revitalize its business.
The restructuring calls for an investor group comprising two of the company’s biggest shareholders, Saudi Prince Al Waleed bin Talal and Ong Beng Seng, and a trust belonging to chairman and CEO Robert Earl’s family, to put in $30 million for a 70% stake in the new Planet Hollywood. The investors, who will split the investment and equity stake in roughly three equal parts, will also help the company obtain a minimum $40 million bridge facility. Current management will stay in place, Earl said.
Current stockholders may be losers under the plan. The complex restructuring calls for all 100 million existing shares of the company’s common stock to be canceled and exchanged for 200,000 new warrants that can be turned into new common stock for three years at a price yet to be determined.
At least one stockholder took exception to the restructuring plan. Bonnie Falkenberg filed suit in Delaware Chancery Court, asking a judge to halt any restructuring that denies stockholders their “rightful share” of company assets. Company officials had not seen the suit late Tuesday.
The revamp, if approved by bondholders, would bring in a $30 million cash injection to keep the company running as it disposes of non-core or unprofitable businesses such as ice cream parlors, sports and music restaurants and hotels and gets back to basics, Earl told Daily Variety.
“I’m announcing the beginning of a new era,” said Earl, who has been pilloried by the financial community for more than a year as Planet Hollywood struggled with high debt and red ink. “When the company was a smaller animal and just focused on Planet Hollywood, it was very successful,” he said, shrugging off criticism that the food was mediocre and the stars that helped found the franchise didn’t show up often enough.
Earl founded Planet Hollywood along with Keith Barish and actors Sylvester Stallone, Demi Moore, Bruce Willis and Arnold Schwarzenegger. Barish left the company in March, resigning as board member and selling nearly half his stock. In June, former president William Baumhauer resigned.
Earl said the company’s ills came from competition from other theme restaurants and spreading itself too thin. A big part of the solution is shuttering or selling many of the company’s businesses like the All Star Cafe chain, along with a handful of Planet Hollywood locations that aren’t profitable. Of the 80 restaurants, Earl is evaluating which ones will go.
Planet Hollywood has been in default on $15 million in interest payments for an outstanding $250 million worth of notes since April. Holders of not less than $160 million worth of the notes must approve the revamp plan for it to move forward. If they agree, which Earl expects to happen sometime this week, they will receive a combination of $47.5 million in cash, $60 million in new, secured notes and newly issued common stock equal to a 25.6% stake in the reconstituted Planet Hollywood.
New board members
Planet Hollywood’s board will have five members, three from the investor group organized by Earl and two designated by the note holders.
The company said the restructuring will be effected through a voluntary, pre-negotiated or pre-packaged Chapter 11 filing subject to formal documentation. It’s not clear when the company will file officially, but it will probably occur within 30 days.