VIP Cinema pre-packaged plan draws objection from Regal Cinemas

By Sarah Lizee

Olympia, Wash., March 23 – VIP Cinema Holdings, Inc.’s joint pre-packaged plan of reorganization drew objection from Regal Cinemas, Inc. on Monday, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

Regal said it purchased from VIP Cinema, LLC about 676,000 recliners and attendant accessories totaling about $40 million.

“Despite VIP’s warranties, there were significant defects in the VIP products, and VIP knew of these defects at the time it made representations to VIP. VIP’s conduct, thus, constitutes fraud in the inducement and negligent representations,” Regal said in the objection.

“Regal brought these defects to VIP’s attention, and VIP’s CEO promised to repair or replace the defective recliners and attendant accessories. Unfortunately, VIP later refused to live up to its CEO’s agreement.”

Regal said it initiated litigation against VIP to recover based on VIP’s wrongful conduct, but VIP has not filed an answer in the litigation, nor has it asserted any counterclaim.

Regal also said the current economic and public health conditions are very likely have a material adverse effect on the debtors.

“The plan was drafted and filed before the current economic and public health crisis developed,” Regal added. “The disclosure statement outlines the economic and business risks, many of which likely and unfortunately have come to fruition.”

Regal said it intends to exercise setoff and recoupment rights if VIP asserts claims against it, but “the plan appears drafted to circumvent the setoff and recoupment rights of Regal.”

Additionally, Regal said the plan “discriminates unfairly and is not fair and equitable with respect to each class of claims or interests that are impaired under and have not accepted the plan, and, thus, violates Section 1129(b)(1) of the Bankruptcy Code.”

VIP Cinema is a New Albany, Miss.-based cinema seating company. The company filed bankruptcy on Feb. 18 under Chapter 11 case number 20-10345.

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