(Reuters) - VIP Cinema Holdings, the largest maker of luxury reclining seats for U.S. movie theaters, on Tuesday filed for bankruptcy, citing a glut of seating as box office receipts fell, screen growth slowed, and older seats lasted longer than expected.
In filings with the U.S. bankruptcy court in Delaware, VIP said its Chapter 11 reorganization would hand control to its lenders and private equity firm H.I.G. Capital, which would take a 51% equity stake, and eliminate $178 million of long-term debt.
Court approval is required. VIP was founded in 2008 in New Albany, Mississippi, as a residential furniture maker, and moved its corporate offices to St. Louis last year. It said it has a 70% share of the U.S. market for luxury movie theater seating.
In a court filing, Chief Restructuring Officer Stephen Spitzer said the premium recliner market had by 2017 “reached a near saturation point” following theater upgrades by chains such as AMC, Cinemark and Cineplex, and the number of new screens has since remained “relatively flat.”
He also said VIP’s initial belief that seats it sold in 2012 and 2013 would need replacement by now was incorrect, in part because box office and theater attendance have fallen, and the company now expects a “much longer” replacement cycle.
U.S. movie theaters grossed $11.32 billion in ticket sales in 2019, down 4.8% from 2018, according to Box Office Mojo.
Spitzer said that after the restructuring, “VIP will be well-equipped to succeed in the competitive consumer landscape.”
VIP hopes to emerge from bankruptcy by mid-April, while preserving 373 jobs.
H.I.G. is based in Miami and manages more than $35 billion in equity capital, according to its website. It invested $62.5 million in VIP in 2017, Spitzer said.
Reporting by Jonathan Stempel in New York; Editing by Richard Chang