By Dan Nienaber
Free Press Staff Writer
ST PETER —
A Twin Cities cinema business that was able to save St. Peter’s movie theater during hard times is having financial problems of its own.
Facing foreclosure on a 15-screen mega theater it built in St. Michael, Midwest Theatres Corp. filed for bankruptcy Sept. 14.
The company does business as CineMagic Theatres. The St. Michael-based business operates six other theater complexes in Minnesota, including the St. Peter Cinema 5, as well as theaters in Okoboji, Iowa, and Menomonie, Wis.
Several of the CineMagic theaters are listed as collateral for loans in bankruptcy documents. The only loan listed that is directly connected to the St. Peter theater is the $75,000 remaining to be paid on a community development loan provided by the city.
Russ Wille, St. Peter Community Development director, said he’s been told CineMagic has no plans to close its smaller Minnesota theaters. The branch of the company that owns the St. Michael theater, which could be closed or sold to another company, is separate from the branch that owns the other theaters, Wille said.
“We don’t anticipate this is going to impact the St. Peter operation in the least,” he said.
CineMagic has arranged to only pay interest on the St. Peter loan, which was approved in 2008 to cover costs of improving the building and replacing equipment, until the bankruptcy is settled, Wille said. The company will decide later whether to make back payments on the loan or to continue making regular payments.
The original loan was about $85,600. A balloon payment, which requires the loan to be paid off in full, will be due in 2011, Wille said.
After filing a lawsuit in Wright County, where the St. Michael theater is located, United Bankers’ Bank of Bloomington was granted an $8.7 million judgment in August. The bank is naming Midwest Theatres Corp. and both of its CineMagic branches as debtors in the judgment. Bankruptcy documents show CineMagic had revenues of about $14 million in 2008 and about $16.5 million in 2009.
A bankruptcy judge has authorized CineMagic to use up to $866,600 to pay its 271 employees and cover other operating costs through Wednesday. After a hearing that also is scheduled for Wednesday, the judge will decide whether the business will be allowed to use more cash to cover costs through Dec. 4.
Wille said the city continues to collect $9,900 per year in tax-increment financing payments for financing that was issued to the theater’s previous owner. Those payments are collected from taxes paid on the building now. No matter what happens with the bankruptcy, Wille said the city does not expect to receive full payment on its financing to the previous owner.
Tax-increment financing is a taxpayer subsidy where the additional property taxes generated by improvements are used to pay off some of the improvement costs. The financing was issued when the theater was built in by the original owners in 1997. When CineMagic bought the building in 2006, $192,000 in TIF was still owed to the city.
CineMagic representatives and the St. Peter theater’s general manager did not return telephone calls from The Free Press. Wille said he hasn’t received any indication that business will change at the St. Peter theater. It is still open and showing first-run movies.
“We’re still committed to the theater,” Wille said. “It’s a benefit to the city because residents can attend and it brings business into the community.”