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Chuck E. Cheese Parent Files for Bankruptcy, Hit by Pandemic (2)

June 25, 2020, 3:08 PM

CEC Entertainment Inc., the parent of Chuck E. Cheese and Peter Piper Pizza, filed for bankruptcy protection after the coronavirus pandemic shuttered its locations and kept families at home.

The filing in the U.S. Bankruptcy Court for the Southern District of Texas makes CEC the latest in a string of companies upended by Covid-19. Lockdowns have drained revenue, keeping consumers at home and pushing corporations into bankruptcy.

CEC, acquired by private equity firm Apollo Global Management Inc. in a 2014 leveraged buyout, has more than 600 Chuck E. Cheese outlets and over 120 Peter Piper Pizza venues.

As of June 24, 266 company-operated Chuck E. Cheese and Peter Piper Pizza restaurant and arcade venues have re-opened, CEC said in a statement. It expects to maintain operations in theses locations during the Chapter 11 process, and to open additional locations each week. CEC franchised locations operate under separate legal and financial structures and are not included in the Chapter 11 filings, the company said.

The company filed for bankruptcy protection without a deal in place. It said it will use the bankruptcy process to continue discussions with its stakeholders and landlords to achieve a balance sheet restructuring that “supports its re-opening and longer-term strategic plans.”

Both loan and bondholders to CEC were contemplating putting new money into the business to keep it afloat, Bloomberg reported last week. They brought in advisors to help them evaluate options, including fresh capital to help CEC ride out the pandemic.

Read More: Chuck E. Cheese Debt Talks Said to Accelerate With Kids at Home

CEC’s bonds due 2022 plunged after the filing, falling 11 cents on the dollar to fresh lows of 3.5 cents, according to Trace bond trading data. Its term loan also fell from the high 60s to a bid-ask of 60-65 cents on the dollar, according to people familiar with the pricing.

Entertainment and leisure have been among industries hardest hit by state and federal guidelines to stay at home. Though restrictions are starting to ease, it’s unclear how many consumers are ready to return to family entertainment destinations.

Irving, Texas-based CEC was originally incorporated under the name ShowBiz Pizza Place Inc. The company changed its name in 1998 to CEC Entertainment and today its franchisees operate venues with locations in 47 states and 16 foreign countries and territories, according to its website.

A plan to take CEC’s parent company Queso Holdings Inc. public through a merger with shell company Leo Holdings Corp. was abandoned last year -- a deal that would have valued the firm at about $1.4 billion.

The case is In RE: CEC Entertainment Inc., No. 20-33163. U.S. Bankruptcy Court for the Southern District of Texas (Houston).

(Updates with further plan details starting in fifth paragraph and debt prices.)

--With assistance from Ken McCallum.

To contact the reporter on this story:
Katherine Doherty in New York at kdoherty23@bloomberg.net

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

Nicole Bullock, Natalie Harrison

© 2020 Bloomberg L.P. All rights reserved. Used with permission.