Planet Hollywood tries to get back on feet
By Mike Schneider
Associated Press
ORLANDO, Fla. — Trying to regain its star power, Planet Hollywood International Inc. is getting a makeover as it emerges from bankruptcy for the second time in more than two years.
Associated Press
The movie-themed restaurant and retail store company, which once counted actors Bruce Willis, Demi Moore and Arnold Schwarze- negger as backers, will be a leaner company, having slimmed down from 22 to 10 restaurants.
Visitors enter Planet Hollywood in Orlando, Fla. This restaurant is one of 10 scheduled to survive as the company prepares to emerge from bankruptcy again.
It will be privately held, having been publicly traded since 1996.
U.S. Bankruptcy Judge Arthur Briskman is expected to confirm the company's reorganization plan during a hearing Monday, despite objections from companies and local governments that said they're still owed money and back taxes.
If the plan isn't approved, Planet Hollywood's only options are to find a buyer or liquidate. Creditors believe the approval is a done deal.
"As far as confirmation is concerned, the train has already left the station," said Roy Kobert, an Orlando bankruptcy attorney, who is representing AT&T Corp. The communications company said Planet Hollywood owes it almost $700,000.
To help pay off two lenders, Planet Hollywood is holding an auction of some of its movie memorabilia during the weekend in an effort to raise at least $1 million.
Among the 300 items to be auctioned today by Sotheby's in New York is a dress worn by screen siren Rita Hayworth, James Cagney's suit from "Yankee Doodle Dandy," a Superman costume worn by actor Christopher Reeve and a stagecoach used by John Wayne.
Ten restaurants in key tourist destinations will be left in the 11-year-old company: Atlantic City, N.J.; Honolulu; Las Vegas; Minnesota's Mall of America; Myrtle Beach, S.C.; New York; Orlando; London; Paris; and Disneyland Paris. Company officials said they may sell the London location soon.
Those locations produced between 60 percent to 70 percent of the company's revenue before it filed for bankruptcy, said Robert Earl, the company's CEO and president.
"We trimmed back to our core stores," Earl said.
In 1998, Planet Hollywood and its franchises and licensees had 95 restaurants in 31 countries. But after a $201 million operating loss in 1998, the company filed for bankruptcy the next year, citing increased competition as the reason for a decrease in diners.
Planet Hollywood emerged from bankruptcy in 2000 with 22 restaurants. But the company filed for bankruptcy again last year, saying the terrorist attacks and subsequent decline in tourism had damaged sales.
Despite the company's tumultuous track record, the management team will stay the same. Tom Avallone will remain the company's chief financial officer, and Mark Helm will stay as the company's vice president.
Earl will keep his job and $600,000 annual salary. Earl's celebrity contacts and intimate knowledge of the company were crucial to getting the unsecured creditors to agree to the plan.
"Without Mr. Earl and without the celebrities, there would be no reorganization," Andrew Silfen, an attorney for the unsecured creditors committee, said during a recent hearing.
Earl said operating Planet Hollywood as a private company will allow it to grow without the pressures of quarterly earnings reports and scrutiny from federal regulators and the media.
"I'm up to the challenge of getting back to its formal glory," Earl said.
Not everyone is happy with the plan, and objections have been filed.
Planet Hollywood's landlords in Atlantic City and Nevada said the company hasn't brought enough celebrities to the restaurants. The company also is in a rent dispute with its New York landlord.
But attorneys in the case said the objections shouldn't stand in the way of the judge's approval.
The plan calls for 214 holders of $76 million in pay-in-kind notes to receive $20 million in new notes and a 51 percent stake in the reorganized company. Pay-in-kind notes are similar to promissory notes but they are payable in something other than cash, such as stock or services.
Earl gets a 10 percent stake in the company. The rest of the company will be divided among three lenders and investors: Bay Harbour Management LLC, South Trust Bank and Serena Holdings Ltd.
Unsecured creditors holding $28 million in claims will be paid $2.4 million minus fees, and a $100,000 administrative fund will be created to pay for any lawsuits.
"There's been a lot of negotiations over the last two months with a lot of parties," Scott Shuker, Planet Hollywood's attorney, said at a recent hearing. "I think this balances the needs of all the creditors. It gives the company a fresh start."
