Sun Sentinel Palm Beach Edition
IPic Entertainment warns of possible bankruptcy filing
Upscale theater operator iPic Entertainment may need to file for bankruptcy protection but, as yet, has no plans to close.
Boca Raton-based iPic, which opened a new eightscreen theater in Delray Beach in March, said in a filing with the Securities and Exchange Commission last Friday that it failed to make a $10 million payment due July 1 and has hired financial and legal advisers to help assess alternatives
to restructure its debts.
One of those alternatives could be through a Chapter 11 bankruptcy proceeding, the filing said.
After the filing, the stock plunged to just over $1.
iPic’s theaters continue to operate nationwide, including in South Florida.
iPic officials couldn’t be reached for comment Wednesday despite phone calls.
The company offers movies with in-theater dining and luxury seating at 123 screens in 16 cities in nine states.
In March, chairman and CEO Hamid Hashemi told the South Florida Sun Sentinel he planned on opening iPics in Fort Lauderdale, Sunrise and the Design District in Miami. Other active South Florida locations are in Boca Raton and North Miami Beach.
But while iPic is intent on expanding, bigger rival movie chains are replicating its business model. AMC, Regal, and Cinemark all have spent millions on retrofitting theaters with recliner seats while adding fancier food and drink options. Even independent theater operators have moved in the same direction.
The strategy has helped woo some movie fans back to theaters and away from services such as Netflix. But the Motion Picture Association of America said in its 2018 annual report that most of the industry’s revenue growth is being driven by non-theatrical sources such as online video services.
The iPic in Delray, on the former sites of the city library and Chamber of Commerce, stirred controversy in late May with the company’s suggestion that it might build a restaurant on the roof. Besides the luxury theater, the location consists of offices, shops and a parking garage. The theater has valet parking and offers food, blankets and pillows delivered to moviegoers’ reclining chairs. The cost is $29 per ticket.
iPic said earlier this year that it expected to open five new U.S. locations “in 2020 and 2021 and thereafter.” A theater in Irvine, Calif., which had been expected to open this fall, is scheduled to open next year. Management also said it has been cleared to receive a license to operate in Riyadh, Saudi Arabia, that nation’s capital.
But the company’s stock declined by 42 percent Monday after management filed its financial disclosure. As of midday Wednesday, the shares were trading at $1.01. Its 52-week high was $10.45.
The missed interest payment was due July 1 to the Teachers’ Retirement System of Alabama (RSA), a pension fund for the state’s teachers. The RSA also holds 39.2 percent of the company’s stock, according to company filings.
iPic has $204 million of debt under a credit line extended by the pension fund. Management said it is now in talks to draw on the money, but none has been released. While the company has not been declared in default, iPic reported its available cash is $2.2 million, which is not enough to cover its debts.
“We do not have adequate cash on hand or other available assets to repay our outstanding indebtedness and RSA could foreclose upon the property that is pledged to secure the credit facility, which … includes substantially all of our assets,” the company’s SEC filing said.
For the first quarter of 2019, the company reported its net losses had grown to $9.3 million from $6.4 million the year before, while revenues declined to $30.2 million from $38.7 million in 2018.
In a statement, Hashemi said “the industry surprised us all with a slower-than-expected start” in 2019. He said the government shutdown and bad weather at high-volume theaters “only added to this challenge.” Nonetheless, he predicted that internal cost controls and a membership rewards program would contribute to better results as the year unfolded.