‘Hell to Pay’ if 7 Billion Chuck E. Cheese Tickets Not Shredded

Chuck E. Cheese’s bankrupt parent won court approval to pay $2.3 million to ticket suppliers to shred more than 7 billion paper prize tickets, a proceeding that came with a judge’s stiff warning that they should be properly destroyed.

“If I see a ticket leakage, I’m going to be very upset,” Judge Marvin Isgur of the U.S. Bankruptcy Court for the Southern District of Texas said Monday at a hearing with CEC Entertainment Inc. “If I find somebody diverted tickets before they destroyed them, there’s going to be hell to pay.”

The tickets, which would fill 65 cargo shipping containers, could be redeemed for about $9 million worth of prizes, according to the company’s filings.

CEC filed an emergency motion Sept. 14 seeking court approval of settlements with its vendors that tasked them with destroying the tickets.

CEC had been purchasing the tickets from three vendors on an ongoing basis based on the arcades’ business. After the Covid-19 pandemic forced closures, the company stopped ordering them, resulting in the tickets being stuck in its supply chain.

CEC has reopened some locations in recent weeks. Chuck E. Cheese will continue to honor all tickets currently in circulation and held by customers, the company said in its filing.

Isgur pressed the company to explain why there were so many tickets. “This is a lot of money to destroy something,” Isgur said. “If we’re paying this much to destroy it, they’d better destroy it.”

Under CEC’s proposed settlements, the three vendors—Eastern Trading LLC, Supply Chain Engineering (SCE), and Performance Food Group (PFG)—will destroy the tickets instead of delivering them to the company.

CEC will pay Eastern Trading $771,061 to destroy its tickets.

PFG agreed to hold on to 2,500 cases of tickets for franchisees’ future needs and destroy the rest for $788,113. The PFG settlement also resolves $1.2 million of PFG’s outstanding pre-petition claims regarding spoilage and obsolete products, the company said at the hearing.

SCE will destroy its inventory and direct one of its third-party suppliers, Jasuindo Tiga Perkasa, to destroy the tickets it holds. The destruction will save costs in overseas freight and import fees, CEC said in its filing.

Chuck E. Cheese also is holding extra paper tickets in storage at various venues that it will need to destroy, James A. Howell, CEC’s chief financial officer, said in a court declaration.

The arcade operator filed for bankruptcy in June amid coronavirus shutdowns.

The case is In re CEC Entertainment, Inc., Bankr. S.D. Tex., No. 20-33163, hearing 9/21/20.