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Beset by financial problems, Muvico faces litigation, takeover

The Muvico Starlight 20 in New Tampa, which opened in 1999 with a 1950s drive-in theater theme, is fighting eviction.

Times (1999)

The Muvico Starlight 20 in New Tampa, which opened in 1999 with a 1950s drive-in theater theme, is fighting eviction.

FORT LAUDERDALE — Muvico Theaters, known for its flashy themed multiplex cinemas, is embroiled in litigation over mounting financial problems that pushed the theater chain to the brink of bankruptcy.

Since October, Muvico hasn't made payments on a $60 million line of credit or on the leases for five of its 14 theaters held by affiliates of real estate investment trust iStar Financial. Now the New York REIT is foreclosing by trying to take control.

Meanwhile, a second landlord, a Kansas City real estate investment trust, has sued to evict Muvico from its Davie, Pompano Beach and one of its four high-profile theaters in the Tampa Bay area. Muvico is fighting eviction from the Starlight 20 in the Highwoods Preserve in New Tampa.

Also putting the squeeze on Muvico: its 20-screen megaplex that anchors BayWalk, a troubled downtown St. Petersburg entertainment center. Muvico owns its building there, but the shopping complex fell into foreclosure in January and is now the property of the bank Wells Fargo.

Muvico chief executive Michael Whalen and chairman Joe Amaturo did not return calls for comment.

Muvico's problems can't be blamed on the economy. The movie theater industry is enjoying a surge as consumers look for an affordable escape in the midst of a recession. Movie ticket sales and attendance are up by more than 15 percent for the year.

Yet, iStar describes Muvico as a company in the midst of "operational distress." iStar already attempted to remove Whalen and Muvico's board of directors. The proposed replacement: Muvico's founder and former chief executive, Hamid Hashemi, who was ousted in an ugly 2006 power struggle that still rages.

Hashemi had been the creative force behind the brand since 1984 and its 1995 shift to the themed movie palaces with extras ranging from babysitting to valet parking. Several of the theaters were among the top grossing in the country. The company has 14 locations with plans for Coco­Walk in Miami and Fashion Mall in Plantation.

The decision over who controls Muvico's future may be made in New York Supreme Court, where the iStar subsidiary sued last month seeking to be recognized as the theater chain's lawful owner. The litigation also seeks to block Muvico from filing for bankruptcy protection.

The lawsuit claims parent company Muvico Holding has refused to give up ownership control and decision-making powers over the theater chain.

The New York court signed a restraining order that prohibits Muvico Holding and its officers from taking any action "outside of the normal course of business" or "detrimental to the value or ongoing business operations."

Muvico was in discussions early this year to sell some theaters to a national chain and use the money to repay iStar, according to court documents. But a deal never hatched before iStar's affiliates filed suit. Muvico counters that it was not behind on rent.

For Pompano, Muvico says it did pay $462,740.61 in back rent on Dec. 1, the same day the eviction lawsuit was filed.

In another court document Muvico's Whalen informed the landlord that if Muvico did file for bankruptcy it would attempt to get a judge to void the Pompano and Tampa leases.

Mark Albright contributed to this report.

FAST FACTS

Bay area Muvicos

BayWalk 20

151 Second Ave. N,

St. Petersburg

Centro Ybor 20

1600 E Eight Ave., Tampa

Starlight 20

18002 Highwood Preserve Parkway, Tampa

Palm Harbor 10

37912 U.S. 19 N, Palm Harbor

Beset by financial problems, Muvico faces litigation, takeover 03/05/09 [Last modified: Thursday, March 5, 2009 11:02pm]
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