Texas Cinema Says Billionaire Used Virus, Bankruptcy to End Sale

One of Mexico’s richest men is among the latest buyers to bust a deal because of the coronavirus pandemic, according to a court filing by a jilted, Texas theater owner.

Cinemex Holding USA, Inc. is owned by billionaire German Larrea and could have easily honored its March 10 promise to buy a Texas dine-in theater chain, the owner said in a lawsuit in federal court in Houston.

Instead, Cinemex pulled out after about two weeks, blaming pandemic restrictions, and the alleged closure of the U.S.-Mexico border. Cinemex had agreed to buy the chain despite the growing health crisis because U.S. President Donald Trump repeatedly promised the outbreak would be limited, according, the company said in court papers.

Chaos has hit a growing number of transactions that had been set to close after the covid 19 coronavirus was declared a pandemic. Last week, Sycamore Partners moved to terminate its purchase of a controlling stake in lingerie brand Victoria’s Secret from L Brands Inc., saying the retailer can’t blame the coronavirus outbreak for violating terms of the agreement. At the heart of both disputes is whether a buyer can drop out if the seller has been forced by the government to close.

Read more: Billionaire Who Bet Big on Cinemas Stung by Theater Shutdown

The theater chain, Star Cinema Grill, sued and the case landed in front of U.S. District Court Judge Andrew Hanen, who had previously ruled against Larrea in a multi-billion dollar lawsuit related to a mining company controlled by the Mexican businessman.

Just before Hanen was set to make a key ruling in the cinema dispute, Cinemex filed for bankruptcy, halting all court and robbing Star Cinema of a chance to force the deal through.

“The bankruptcy filing is just the latest attempt by CMX — who, of course, is ultimately backed by its multi-billionaire owner German Larrea, the third richest man in Mexico — to evade its responsibilities,” Star Cinema said in a court filing Monday.

Cinemex filed bankruptcy in Miami on April 25 listing as much as $500 million each in assets and liabilities. Like Star Cinema Grill and theaters around the world, Cinemex was hit by restrictions that forced it to shut down.

When a company files court protection in the U.S. nearly all legal actions against it are automatically halted to give the company a chance to reorganize.

The bankruptcy case is Cinemex USA Real Estate Holdings, Inc. 20-14695, U.S. Bankruptcy Court Southern District of Floria (Miami). The lawsuit is Omar Khan vs. Cinemex USA Real Estate Holdings, Inc., 20-01178, U.S. District Court for the Southern District of Texas (Houston)

To contact the reporter on this story:
Steven Church in Wilmington, Delaware at schurch3@bloomberg.net

To contact the editors responsible for this story:
Rick Green at rgreen18@bloomberg.net

Nikolaj Gammeltoft

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