The chain has also approached lenders in the past few weeks to feel out possible interest in a $200 million loan to help pay for a stay in bankruptcy, a source said, as reported by WSJ.
Chuck E. Cheese is facing down a $1.9 million quarterly payment on loans, due at the end of June. Lenders and bond-holders have been working on a deal to help the company stay out of bankruptcy.
As the coronavirus pandemic unfolds across America, with the country moving toward reopening after months of shutdowns that roiled the economy, many Chuck E. Cheese locations haven’t yet reopened.
The company, before the pandemic, was growing, reporting a 2.7 percent in-store sales increase in 2019 after years of declining or flat sales.
And while some of the chain’s locations started to reopen last month, the company has been burning cash with the majority still closed, and it has to now look into raising more capital. The company has also come into danger of breaching loan requirements to reach some earning targets this fall, according to Moody’s Investors Service.
On Friday, Chuck E. Cheese said it would be paying prebankruptcy retention bonuses of nearly $3 million to three top executives, with $1.3 million going toward Chief Executive David McKillips. Those bonuses have become common during the coronavirus pandemic as retention bonuses for insiders and other top officials are illegal under bankruptcy law, WSJ reports.
The chain has been utilizing temperature checks at the front doors since reopening to ensure that no one carrying the virus could potentially infect customers.
Chuck E. Cheese was exploring the idea of going public last year, after being taken private in 2014 by owner Apollo Global Management. But when the pandemic hit, Chuck E. Cheese shuttered its restaurants, ceased paying rent and furloughed a large amount of staff, WSJ reports.