IPic Entertainment warns of a possible bankruptcy

The movie theater-restaurant chain said it did not have enough cash to make an interest payment and is considering Chapter 11.
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IPic Entertainment, the movie theater-restaurant chain that last year raised money from small-time investors in a mini IPO, recently acknowledged that it might have to file for bankruptcy protection after missing an interest payment on its debt.

Boca Raton, Fla.-based iPic, which operates 16 theaters that double as full-service restaurants, said it has engaged financial and legal advisers to analyze its strategic alternatives, which could include a Chapter 11 bankruptcy filing.

The filing comes just more than a year after iPic raised $15.1 million from mostly small investors in a Regulation A+ initial public offering, frequently called a mini IPO.

Those shares, which initially traded at $18.50 per share, have since fallen to $1, and the company warned they could be canceled altogether in case of a Chapter 11.

A restructuring under Chapter 11 “could cause the shares of our existing common stock to be canceled, resulting in a limited recovery, if any, for holders of our common stock.” Shareholders would be “at significant risk of losing all their investment in our shares.”

Revenues in the first three months of the year declined 22%, and the chain recorded a loss of nearly $15 million, albeit one that was 30% narrower than the loss from a year earlier. The company has more than $200 million in long-term debt. Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, was negative $3.8 million.

More than half of the company’s revenue comes through the sale of food and beverages.

CEO Hamid Hashemi blamed tough comparisons, the government shutdown and bad weather in the early part of the year for the bad start.

According to a federal securities filing, iPic had just $2.2 million in cash on hand as of July 25. Its interest payment due July 1 was $10 million.

The company was one of a couple of restaurant chains that sought money from customers under new federal rules designed to help small companies raise money through public filings. Both companies have seen their valuations fall since the offerings: Fatburger owner Fat Brands, which raised $24 million in late 2017 at $12 a share, has lost more than two-thirds of its valuation since then. Earlier this year, it received a loan from Biglari Holdings, the owner of Steak ‘n Shake.

IPic’s lenders are pensions: the Teachers’ Retirement System of Alabama (RSA) and The Employees’ Retirement System of Alabama.

The company had previously said it planned to draw down on a credit facility it has with the pensions to make that interest payment, but the firms would not make any more credit available.

The company said it is in “active discussions” with the lenders on its ability to draw down on that loan.

“We do not have adequate cash on hand or other available assets to repay our outstanding indebtedness,” iPic said in its filing. “RSA could foreclose upon the property that is pledged to secure the credit facility,” which includes all of its assets.

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