iPic Entertainment, the luxury theater chain that helped popularize the concept of dine-in moviegoing, has filed for Chapter 11 bankruptcy. It hopes to restructure its debt and has engaged investment banker PJ Solomon to pursue a possible sale.
Last month, the company warned investors that it might be file for bankruptcy after it missed a $10.1 million interest payment to the Employees Retirement System of Alabama (ERSA) and the Teachers Retirement System of Alabama. At the time, the theater circuit said it had cash-on-hand of $2.2 million.
In an interview, iPic CEO and founder Hamid Hashemi told Variety the company had secured $16 million debtor-in-possession (DIP) financing from the Teachers Retirement System of Alabama. The loan carries an interest rate of 10.5%. That funding will be used to pay staff and keep iPic’s 16 locations open and operational.
“It’s business as usual,” said Hashemi. “We’re going to continue showing movies. We’ll have the same management team. The same membership program. Our guests can expect the same level of service. This is a restructuring of our balance sheet. It’s not an operational issue.”
Hashemi said that the two million members of iPic’s loyalty program will not be impacted and stressed that the company will honor gift cards and will continue to uphold its advertising partnerships on its pre-show programming. He acknowledged, however, that its 444 holders of the company’s common stock risk losing some or all of their investment.
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iPic has been publicly traded since February 2018, raising $15.1 million with its initial offering. The company lost $9.3 million during its most recent quarter on revenue of $30.2 million. Year-over-year its losses mounted as its revenues slipped. For the same quarter in 2018, iPic posted losses of $6.4 million on revenues of $38.7 million.
Hashemi blamed the company’s financial issues on increased competition in the luxury theater space. In recent years, AMC, Regal, and other chains have followed iPic’s example by outfitting locations with recliner seats and by offering alcoholic beverages and high-end food items at certain venues.
“When we started this business back in 2007 there was nobody doing this type of dine-in, affordable, luxury experience,” said Hashemi. “Eventually the rest of the industry woke up. Our model inspired others to upgrade their circuits and the competition became more fierce.”
He also said that the company had struggled to build new venues at the pace it had anticipated. It initially wanted to open 25 locations in four to five years, but fell short of that goal. Hashemi noted that iPic had hoped that construction on its locations would take two years, but iPic theaters in New York City and Delray Beach, Florida took five and six years to build, respectively.
“We were not able to ramp up as quickly as we would like and a big part of that had to do with the development cycle,” said Hashemi.
If it sells, the iPic CEO said the company could be an attractive target for a private equity player or a strategic investor such as another exhibition chain.
“The range of suitors is wide and we’ve had a lot of interest in the past,” said Hashemi.
In its initial filings, iPic estimates its total debts are $290.9 million and its total assets are $157 million. The company’s list of unsecured creditors includes the law firm Yetter Coleman LLP with $2.9 million in claims, as well as Walt Disney Studios with $1.3 million in claims, Sony Pictures with $668,723 in claims, Universal Film Exchanges with $124,740 in claims, and Paramount Pictures with $122,196 in claims. The company also lists a $1.5 million class action settlement among its unsecured creditors.
Pachulski Stang Ziehl & Jones LLP is serving as legal counsel and Aurora Management Partners is serving as financial advisor as iPic navigates a restructuring process it anticipates will conclude in 90 to 120 days.