CMX Cinemas

341 MEETING OF CREDITORS

A 341 meeting is set for June 15th at 1 pm.

The 341 meeting is conducted by the United States Trustee’s attorney and the Debtor’s representative – usually its CEO – is required to attend. Creditors are allowed to attend either themselves or through counsel and ask the Debtor’s representative questions about the Debtor’s finances and why the Debtor is in bankruptcy.

Due to COVID-19, the 341 meeting will be held by telephone. You are allowed to call in or you can hire an attorney who can call in for you and ask questions.

Some topics that should be addressed at the 341 meeting include:

1. The relationships among the Debtors and their affiliated non-debtor entities.
2. The Debtors’ plans going forward, including whether they will file bankruptcy for affiliates.
3. Details regarding proposed financing for the Debtors from its Mexican parent company.

CMX IS SEEKING TO CLOSE SOME THEATERS

As of April 25th, which is when CMX filed for bankruptcy, it operated 41 theaters nationwide. As of March 20th, it was forced to close every one of those theaters due to county, state, and/or nationwide shutdown orders stemming from the global coronavirus pandemic. CMX filed for bankruptcy due to these closures and subsequent loss of income.

After filing for bankruptcy, CMX filed a motion with the Court seeking permission to close some of its theaters. Specifically, CMX wants to be able to shutter nine of its 41 theaters as of April 30, 2020. It has not yet laid out plans for the remaining 32 theaters.

These closures will have a dramatic impact on unsecured creditors because the landlords for the nine theaters will have very large claims for CMX breaking the leases early. CMX claims that this is good for creditors because the nine theaters were under-performing even before the pandemic. These are claims that unsecured creditors could investigate and validate if a Committee is formed. Unsecured creditors should have a voice in something that could change the claims pool so drastically.

KEEP AN EYE ON INSIDER ISSUES

As typically happens in bankruptcy, there are several questions relating to insiders and affiliates that have already been raised in the Cinemex bankruptcy cases. Insider issues highlight why a Committee of Unsecured Creditors is so important. A Committee is an unbiased, outside voice that can investigate and pursue questionable insider transactions to ensure unsecured creditors are paid what they deserve.

Additional issues are sure to come up as the case goes on. At this early stage, we have already observed the following insider and affiliate concerns:

• There are three affiliated companies that have “not yet” filed for Chapter 11.
• Insider executives are each being paid over $200,000 per year.
• The Debtors have suggested that they will take financing from their parent company but have not yet disclosed the terms.
• Before bankruptcy, employees were being paid from a non-debtor affiliate company, but employee pay was being funded by the Debtors through “inter-company transfers.”