Planet Hollywood seeks OK on reorganization

Mike Schneider

Monday, Dec. 16, 2002 | 11 a.m.

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.

The movie-themed restaurant and retail store company, which once counted actors Bruce Willis, Demi Moore and Arnold Schwarzenegger as backers, will be a leaner company, having slimmed down from 22 to 10 restaurants.

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 today, despite some objections from companies and local governments that claim 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 claims 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 over the weekend in an effort to raise at least $1 million.

Among the 300 items to be auctioned Saturday by Sotheby's in New York was a dress worn by screen siren Rita Hayworth, James Cagney's suit from "Yankee Doodle Dandy," a Superman costume worn by actor Christopher Reeves and a stagecoach used by John Wayne.

Ten restaurants located in key tourist destinations will be left in the 11-year-old company. They will be in Atlantic City, N.J., Honolulu, Las Vegas (in the Forum Shops at Caesars), Minnesota's Mall of America, Myrtle Beach, S.C., New York, Orlando, London, Paris and Disneyland Paris. Company officials say 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, claiming the Sept. 11, 2001, 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-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.

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 claim 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 between 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 any 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."