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Chuck E. Cheese Almost Bankrupt, Could Shut Down Forever

Chuck E. Cheese Almost Bankrupt, Could Shut Down Forever

Chuck E. Cheese has 610 branches in 47 states across America and all of them have been shut down for more than 2 months.

Kid's restaurant Chuck E. Cheese could shut down for good after being severely hit by the Coronavirus pandemic. The popular kid's restaurant chain has remained shut for months because of the pandemic and is nearly $1 billion in debt. The restaurant chain has approached lenders for an added $200 million loan to help the establishment wait out the pandemic and remain in business, reported Wall Street Journal. The brand reported nearly $1 billion in debt on its balance sheet at the end of last year and has struggled to raise money with branches continuing to remain shut. Chuck E. Cheese has 610 franchises in 47 states and was forced to close all its branches because of the pandemic. 

NEWARK, CA - JANUARY 16: A sign is posted in front of a Chuck E. Cheese restaurant on January 16, 2014 in Newark, California. CEC Entertainment, operator of 577 kid-themed restaurants, announced today that it has agreed to be purchased by private equity firm Apollo Global Management for $1.3 billion. (Photo by Justin Sullivan/Getty Images)

 

Fearing an exodus of top executives, the restaurant chain announced it would pay them retention bonuses to help them continue with them during the financial crisis. The Texas-based restaurant said it would pay top executives close to $3 million, including $1.3 million to CEO David McKillips, according to the company's filing with the Securities and Exchange Commission. The said it was considering refinancing, bankruptcy, and restructuring, in April, expecting a relatively short shutdown but the pandemic has caused the business to be shut down for more than 2 months now. 

 



 


It's not just Chuck E. Cheese, the whole restaurant has been severely hit by the pandemic. IHOP, Denny’s, Ruby Tuesday and TGI Fridays are some of the chains that have shut down for good because of the pandemic. In the year 2019, Chuck E. Cheese posted revenues of $900 million, with 44% of the revenue coming from food and beverage sales, according to its annual report.

WASHINGTON, DC - JUNE 10: U.S. President Donald Trump winks during a round table discussion with African American supporters in the Cabinet Room of the White House on June 10, 2020 in Washington, DC. (Photo by Doug Mills-Pool/Getty Images)

 

The economy has tanked on account of the Coronavirus pandemic and caused serious damage to businesses all over America. Many household American brand names are in danger of disappearing forever. Department store Neiman Marcus Group is another established that was hit by the pandemic, even considering filing bankruptcy as part of the financial crisis stemming from the Coronavirus pandemic. Neiman Marcus announced it was furloughing close to 14,000 employees for the month of April.

 



 



The company's financial structure was downgraded by Standard & Poor to a CCC-rating in April. Standard & Poor cited an unsustainable capital structure and the Coronavirus outbreak as reasons for downgrading the business group. A CCC rating is reserved for extremely high-risk bonds or investment. Banks are not permitted to invest in CCC rated bonds. It usually represents "junk" territory. The credit rating agency predicts a bleak future for the company. "In light of the significant headwinds stemming from the coronavirus pandemic and our expectation for a US recession this year, we believe the company’s prospects for a turnaround are increasingly low," noted the credit rating's agencies analysts. “We continue to view its capital structure as unsustainable,” added the analysts. 

In March, Congress sanctioned an $850 billion stimulus package to bail out many industries that are severely hit under the coronavirus outbreak, including the airline industry. The proposed stimulus package is bigger than the 2008 bank bailout passed under the 2009 American Recovery and Reinvestment Act. The Obama administration had sanctioned $787 billion to prop up the economy following the recession. 



 


While unemployment shot up on account of the shutdown and social distancing guidelines, positive numbers were reported in May. Employment surprisingly rose by 2.5 million in May and the jobless rate declined to 13.3%, according to data released by the Labor Department. The unemployment rate in April was 14.7%. Economists surveyed by Dow Jones said they had expected the unemployment rate to rise to 19.5% in the month of May. The numbers hint that the economy could have turned a corner and is on the road to recovery. “It seems the damage from the nationwide lockdown was not as severe or as lasting as we feared a month ago,” said Scott Clemons, chief investment strategist at Brown Brothers Harriman, reported CNBC. 

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