ASSOCIATED PRESS
Visitors enter Planet Hollywood in Orlando, Fla. Trying to regain star power, Planet Hollywood International Inc. is getting a makeover as it emerges from bankruptcy for the second time in more than two years.
ORLANDO, Fla. >> Planet Hollywood International Inc. emerged from bankruptcy today for the second time in two years, hoping to regain its star-fueled stature in a battered theme-restaurant industry that peaked in the late 1990s. Planet Hollywood emerges
from bankruptcy, againHonolulu is called a "core store" as the
themed-restaurant chain works to recoverBy Mike Schneider
Associated PressThe movie-themed restaurant and retail store company overcame concerns from businesses that claimed they are still owed money, state and local governments that are owed back-taxes and a New York landlord with which it has a lease dispute to win U.S. Bankruptcy Judge Arthur Briskman's approval of its reorganization plan.
"The creditors believe that Planet Hollywood can regain its status," said Scott Shuker, a Planet Hollywood attorney.
The reorganized company will be privately held, having been publicly traded since 1996. It will own 10 stores in top tourist destinations: Atlantic City, N.J., Honolulu, Las Vegas, Minnesota's Mall of America, Myrtle Beach, S.C., New York, Orlando, London, Paris and Disneyland Paris. It ended its Lake Tahoe, Nev., lease.
The top 10 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.
Earl will keep his job and $600,000-a-year salary, too. 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.
Four years ago, Planet Hollywood and its franchises and licensees had 95 restaurants in 31 countries. The company emerged from its first bankruptcy in 2000 with 22 restaurants. But Planet Hollywood again filed for bankruptcy last year, claiming the Sept. 11, 2001, attacks and subsequent decline in tourism had damaged sales.
Shuker said that it's rare for a company to emerge from two Chapter 11 bankruptcies instead of liquidating or finding a buyer, and that the reorganization plan's approval was a vote of confidence from creditors that the Orlando-based company can regain some of its star power.
There remains a remote chance that the reorganization plan could fall apart. Planet Hollywood must whittle unsecured claims to $28 million from the current $31 million by the end of March. In return, Planet Hollywood will pay unsecured creditors $2.4 million minus any fees if they agree not to pursue legal action against the company.
"If it doesn't happen, we have to put Humpty Dumpty back together," Shuker said.
In approving the plan, Briskman gave broad protection from lawsuits to Planet Hollywood's executives, board members and celebrity endorsers. An exception was made for acts that are the result of gross negligence and willful misconduct, violations of federal securities laws and liability for retirement plans.
Shuker argued such protection was necessary to protect the company's relationships with celebrities such as Arnold Schwarzenegger, Bruce Willis, Kevin Bacon and Matt Damon.
"Their services are critical, as are their names and likenesses," Shuker said.
But the U.S. trustee in the case, Elena Escamilla, objected to the broad protection, arguing that creditors should be able to pursue a lawsuit if they think there was negligence or misconduct.
"They're trying to cover themselves instead of trying to take responsibility for actions they may or may not have done," Escamilla said.
A special examiner issued a report last August critical of Planet Hollywood for writing off celebrity debts it might have recovered and for suggesting top executives participated in insider deals. The allegations in the report are not being pursued by the unsecured creditors.
The reorganized Planet Hollywood will change how it compensates its celebrity endorsers, receiving only expense payments instead of getting shares of company stock. Each Planet Hollywood restaurant is required to have six appearances a year from a movie star, according to the company's leases.
Some outstanding issues, such as the company's lease dispute with its New York landlord and claims by AT&T that it is owed almost $700,000, will be decided at a hearing next month.
Holders of pay-in-kind notes from the company will receive a 51 percent stake in the reorganized Planet Hollywood. The rest of the company will be divided among Earl, a trust for Earls' children called Serena Holdings Ltd., Bay Harbor Management LLC and South Trust Bank.
