Luxury movie theater chain iPic filed for Chapter 11 bankruptcy protection on August 5. The company said it will now pursue a sale.
iPic CEO and founder Hamid Hashemi spoke with Variety after the filing regarding the company’s future. Hashemi told Variety iPic “secured $16 million debtor-in-possession [DIP] financing from the Teachers Retirement System of Alabama. The loan carries an interest rate of 10.5 percent.”
Business will continue as usual at iPic’s 16 locations as the funding will be used to pay staff and operating costs.
“We’re going to continue showing movies,” Hashemi told Variety. “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.”
iPic’s troubles surfaced last month when the company warned investors it didn’t have enough cash to make an interest payment. According to an SEC filing, iPic revealed it had about $204 million of outstanding indebtedness to the pension fund under its credit facility with the Teachers’ Retirement System of Alabama and The Employees’ Retirement System of Alabama.
The company said it did not have the funds it needed to pay a $10.1 million interest payment to the RSA. The securities filing showed iPic only had about $2.2 million cash on hand, as of July 25.
“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 said in the filing. “If we are unable to restructure our outstanding indebtedness, including our credit facility with RSA, our significant indebtedness and lack of liquidity will have a material adverse effect on our business, prospects, financial condition, and our ability to continue as a going concern.”
With competition from the rapid expansion of other movie chains like AMC and Regal, Hashemi said, the company struggled to keep pace. His original goal was to expand iPic’s footprint to 25 locations in five years.
After construction delays and unforeseen costs, only two new locations have opened in the past six years. These issues also contributed to the company’s decision to file for bankruptcy.
“Importantly, delays related to the Delray Beach [Florida] location resulted in unforeseen costs and a significant slowdown in circuit-wide development and new grand openings,” Hashemi told CNBC. “The decision to commence a Chapter 11 case to pursue a comprehensive restructuring was not taken lightly but is necessary to accomplish our long-term goals and secure the company’s future.”
In recent years, other movie chains have also expanded their dining and drink options while also outfitting theaters with luxury seating, something that iPic was once known for.
“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.”
Since it was first publicly traded in February 2018, iPic struggled to return positive results. “The company lost $9.3 million during its most recent quarter on revenue of $30.2 million,” Variety reported. In 2018, iPic lost $6.4 million on revenues of $38.7 million.