WestStar Cinemas Files Bankruptcy Papers

WestStar Cinemas Inc., the Encino-based owner of 54 movie houses, including the historic Mann’s Chinese Theatre in Hollywood, filed for voluntary bankruptcy Friday.

Despite record-setting crowds at the U.S. box office this summer, debts were piling up at WestStar as the company struggled to modernize its Mann theater chain with the stadium seating and thundering sound systems that moviegoers have come to expect, WestStar executives said.

“One of the biggest issues we’re facing is that with the buildup of multiplexes, the cost of business is going way up,” said Michael H. Solomon, WestStar’s new chief executive. “We needed to restructure our debt so we could get more capital for expansions.”

WestStar executives said the filing for bankruptcy protection under Chapter 11 won’t affect the Mann’s Chinese, the 72-year-old theater known worldwide as the place where stars from Marilyn Monroe to Mel Gibson have left their footprints in the sidewalk. “Nobody in their right mind would hurt that theater,” Solomon said.

The financial troubles of WestStar, a privately held company controlled by Wall Street investment firm Warburg, Pincus Ventures, highlights the pressures exhibitors are facing in an increasingly crowded and expensive niche of the entertainment industry. This summer, General Cinema Theatres Corp. and United Artists Theatre Circuit also restructured finances because of declining revenue.

“Customers are so savvy now about stadium seating and digital sound,” said Mark Pascucci, senior vice president of marketing at Loews Cineplex Entertainment, which is controlled by Sony Corp. “There’s a lot of pressure on older theaters. Many of them are becoming obsolete.”

Some of WestStar’s most successful locations, like the Mann’s Chinese and Westwood Village theaters, are its oldest. The Mann’s Chinese is under renovation, with plans to add three more theaters, Solomon said. WestStar owns 30 theaters in L.A. County with 181 screens, along with other locations in Northern California and Colorado.

Under the petition filed in U.S. Bankruptcy Court in Wilmington, Del., WestStar listed its liabilities at more than $100 million, with $25 million owed to a New York bank and $2.5 million owed to Cinamerica Theaters.

WestStar was formed two years ago when an investor from Pittsburgh teamed with Warburg, Pincus to buy the theater chain from Cinamerica, a company jointly owned by Paramount and Warner Bros.

Though WestStar executives would not disclose how much they paid for the company, several analysts have said WestStar overpaid and that the high price might be another reason for the company’s troubles.