Metropolitan Theatres: Family Cinema Chain's Subchapter V Bankruptcy

When Metropolitan Theatres Corporation filed for bankruptcy protection on February 29, 2024, it marked the chapter 11 filing of one of America's oldest continuously operating cinema chains. The fourth-generation, family-owned company—founded in 1923 and operated by the Corwin family for over a century—filed under Subchapter V to address the impacts of COVID-19 closures, the 2023 Hollywood strikes, and above-market lease obligations. Thirteen months later, the company emerged with a confirmed consensual plan, family ownership intact, and a restructured lease portfolio covering California and Colorado.

With 97% creditor approval under the Subchapter V process, the plan left family ownership intact. Non-insider unsecured creditors will recover approximately 15.5 cents on the dollar over three years, while equity retained full ownership under Subchapter V's modified absolute priority rule.

A Century in the Cinema Business

Metropolitan Theatres Corporation traces its origins to 1923, when Joseph Corwin founded the company in Los Angeles. Over the following decades, the Corwin family expanded Metropolitan's footprint, operating nearly every movie theater in downtown Los Angeles's Broadway Theater District during the industry's golden age.

In the mid-1960s, Metropolitan was among the first circuits in the nation to venture into Spanish-language film exhibition. The company held the Orpheum Theater until 2001 and expanded into Santa Barbara County in 1950, where it later concentrated much of its operations. Now led by David Corwin—the fourth generation of family ownership—Metropolitan remains independently owned.

At the time of its bankruptcy filing, Metropolitan operated 16 theatres with 87 screens across three states:

The portfolio included two IMAX auditoriums and a mix of owned and leased properties. Santa Barbara County represented Metropolitan's largest concentration of operations, a market the company had served for over seven decades. The Utah locations—both near Park City—served as regular screening venues for the Sundance Film Festival.

Among Metropolitan's assets, the Arlington Theatre in Santa Barbara is a separate owned property. Built in 1931 for Fox West Coast Theatres, the venue combines Mission Revival and Spanish Colonial Revival architectural styles. The theatre occupies the former site of the Arlington Hotel, which was destroyed in the 1925 Santa Barbara earthquake. Designed by Santa Barbara architectural firm Edwards and Plunkett, the Arlington features a tower inspired by the Alcázar of Segovia in Spain.

Metropolitan Theatres purchased the building in 1975, and it remains the largest movie theater and principal performing arts venue in Santa Barbara. The Arlington hosts numerous events associated with the annual Santa Barbara International Film Festival. Metropolitan owns the Arlington outright—it was never subject to the lease issues that drove the bankruptcy filing.

Causes of Financial Distress

Metropolitan's path to bankruptcy began in March 2020 when the company was forced to close all theatres to comply with government mandates addressing the COVID-19 pandemic. The immediate response included layoffs, furloughs, and salary reductions across the organization. Metropolitan completed its reopening by December 31, 2021.

Industry estimates suggest 15 to 20 percent of regular moviegoers never returned to theatres.

The 2023 entertainment industry labor disputes reduced film releases. The Writers Guild of America strike ran from May 2 through September 27, 2023, while the SAG-AFTRA strike extended from July 14 to November 9, 2023. The combined 176 days of production shutdowns affected the release calendar.

With major productions halted for months, fewer films reached theatres. The reduced release schedule was forecast to impair performance through 2024 and into 2025 as production delays moved through development pipelines.

Total domestic box office grosses in 2024 slipped 4% from 2023 to $8.57 billion, while the number of wide releases remained down 6% from pre-COVID levels. At the time of Metropolitan's filing, 2024 box office performance was down 20.1% year-to-date compared to 2023.

The U.S. screen count declined to approximately 35,000 from 41,000 before COVID. Streaming platforms including Disney+, Netflix, and Amazon Prime expanded during the period, alongside premium video-on-demand releases and shortened theatrical exclusivity windows.

At the core of Metropolitan's financial distress lay its lease obligations. The company faced annual lease expenses of approximately $2.6 million across its portfolio, with roughly $313,000 owed to landlords at the time of filing. Many of these lease rates had been negotiated pre-pandemic.

David Corwin characterized the situation directly: "The pandemic was devastating to the business. Plus the strikes and increased cost of labor, rent, and utilities." The First Day Declaration noted the company lacked liquidity to continue operating without "right-sizing the scope of its business and rejecting or modifying certain above-market leases." The company filed a Cash Collateral Motion and pursued restructuring under court supervision.

Pre-Petition Financials and Capital Structure

Metropolitan entered bankruptcy with assets and liabilities near parity, according to the First Day Declaration. The company employed 252 workers—12 full-time and 240 part-time—across its 16-theatre portfolio.

The January 2025 Monthly Operating Report revealed additional balance sheet detail: lease liabilities totaled approximately $17.1 million, stockholder loans stood at $3.4 million, and the SBA loan balance had decreased to approximately $461,700.

Like many entertainment venues, Metropolitan accessed multiple federal relief programs during the pandemic:

The $9 million SVOG provided operating support during the pandemic period. Metropolitan also received more than $12 million in government support across programs.

Metropolitan's capital structure at filing reflected both secured and unsecured obligations:

The American Riviera Bank exposure represented Metropolitan's guarantee of a secured loan to its affiliate, Arlington Theatre Property LLC (ATP). ATP had also provided approximately $2 million in additional loans to Metropolitan during 2023, creating intercompany claims that would be addressed in the reorganization plan. With this capital structure established, Metropolitan turned to Subchapter V as the mechanism for restructuring.

The Subchapter V Restructuring

Metropolitan selected Subchapter V for reorganization. The provision, added to the Bankruptcy Code in 2019, offers several advantages for small business debtors:

No Creditors' Committee: Traditional chapter 11 cases typically require formation of an unsecured creditors' committee, with professional fees paid by the estate. Subchapter V eliminates this requirement, reducing administrative expense and simplifying negotiations.

Debtor-Exclusive Plan Filing: Only the debtor may propose a reorganization plan under Subchapter V, maintaining control of the restructuring process. This prevented landlords or other creditors from advancing competing proposals.

Relaxed Absolute Priority Rule: Subchapter V's modified absolute priority rule allows equity to retain ownership even when unsecured creditors are not paid in full—provided the plan commits projected disposable income to creditor payments over a three- to five-year period.

Administrative Expense Flexibility: Rather than requiring payment of administrative expenses at confirmation, Subchapter V permits spreading these costs over the plan term, easing immediate cash demands.

For the Corwin family, these provisions allowed ownership retention through restructuring. Under traditional chapter 11, the absolute priority rule would have required full payment of unsecured claims before equity could retain any interest. Subchapter V's modified framework allowed the Corwins to propose a plan that creditors could accept, even at reduced recovery rates.

Metropolitan funded its bankruptcy through insider financing, with David Corwin personally providing debtor-in-possession loans under the DIP Financing Motion:

The initial $500,000 DIP facility was approved via the DIP Financing Order in June 2024 after resolving an objection from Camino Real Limited Liability (landlord of the Camino Real Theatre). When liquidity tightened again in late 2024, Metropolitan filed an Emergency DIP Motion on November 1, 2024, and received expedited approval for an additional $500,000 four days later.

Under the confirmed plan, both DIP loans convert to subordinate term loans, with repayment behind non-insider unsecured claims.

Metropolitan's reorganization plan evolved through multiple iterations as landlord objections and creditor negotiations shaped its terms:

The September 2024 modifications addressed objections filed by the City of Santa Barbara (regarding the Fiesta 5 Theatre) and LightWell Real Estate Partners (regarding unpaid postpetition rent). These disputes were resolved before the confirmation hearing.

The Second Modified First Amended Plan received creditor support:

• Acceptance Rate: 97% in both dollar amount and number of claims
• All impaired classes voted in favor
• Confirmation: March 21, 2025
• Effective Date: April 1, 2025

The court entered the Confirmation Order on a consensual basis.

The confirmed plan established the following claim treatment framework:

The general unsecured creditor pool totaled $775,000, distributed over a three-year period from the plan's effective date. Insider unsecured claims—including the intercompany loans from ATP and stockholder loans—received roughly half the recovery of non-insider claims, with the differential redirected to outside creditors.

Lease Strategy and Asset Dispositions

Lease changes were a central feature of Metropolitan's restructuring. The company retained A&G Realty Partners as real estate consultant to evaluate the portfolio and negotiate with landlords. The plan provided for lease rejections and modifications.

Metropolitan formally rejected or declined to renew several lease obligations during the case:

These rejections created unsecured claims for landlords based on statutory damage formulas, addressed through the general unsecured distribution. For continuing leases, Metropolitan negotiated modified terms reflecting post-pandemic market conditions.

Several landlords raised objections during the case that required resolution. LightWell Real Estate Partners filed an objection to plan confirmation on September 19, 2024, citing unpaid postpetition rent; the dispute was resolved consensually before the confirmation hearing. Camino Real Limited Liability initially objected to the DIP financing motion in May 2024; that objection was resolved, with the landlord continuing to receive notices and the lease continuing post-confirmation. 8727 West Third Street Owners (Los Angeles) reached a stipulation in September 2024 resolving disputed lease terms.

The case included the Fiesta 5 Theatre in downtown Santa Barbara. David Corwin declined to renew the lease with the City of Santa Barbara, which owned the underlying property. According to reports, Corwin wanted to remain but could not achieve the necessary rent reduction to make the location viable.

In October 2024, the Santa Barbara City Council voted unanimously to hand the theatre over to Roger Durling and the Santa Barbara International Film Festival (SBIFF). The City's administrative claim was settled for $60,000 payable in installments ($40,000 by May 1, 2025; $10,000 by June 1, 2025; and $10,000 by July 1, 2025).

Metropolitan also divested its entire Utah presence as part of the restructuring. The company operated both commercial movie theatres serving the Park City area: Redstone 8 Cinemas at Kimball Junction and Holiday Village Cinemas 4, which hosts nearly all Press & Industry screenings for the Sundance Film Festival.

Redstone 8 Cinemas—Metropolitan's last theatre in Utah—was sold to Larry H. Miller Megaplex Theatres, a Utah-based regional exhibitor. The acquisition closed on July 1, 2024. The new owners announced plans for luxury renovations, with reopening targeted before the 2024 holiday season. Larry H. Miller committed to maintaining Sundance programming: "We do expect to host Sundance for their next festival at this location."

Following these dispositions, Metropolitan's portfolio focused on California and Colorado, with Utah operations divested and the Fiesta 5 lease not renewed.

Case Administration and Emergence

Metropolitan engaged numerous professionals during its restructuring, with final fee applications filed in May 2025:

Total professional fees approached $1.1 million. Loeb & Loeb agreed to reduce its final fee application by $45,000 to facilitate plan implementation.

Moriah Douglas Flahaut was appointed Subchapter V Trustee on March 4, 2024. Under Subchapter V, the trustee's role differs substantially from traditional chapter 11: rather than assuming operational control, the trustee facilitates plan confirmation and monitors debtor compliance. Flahaut's fee application of $33,660 for services through March 31, 2025, reflected this more limited scope.

The post-confirmation period established several key deadlines:

The Bankruptcy Court retained jurisdiction for plan implementation matters, including professional fee disputes, administrative claim allowances, and plan interpretation.

Metropolitan Theatres Corporation emerged from bankruptcy as the "Reorganized Debtor" on April 1, 2025, operating under the terms of the confirmed Second Modified First Amended Plan. The Corwin family maintains operational control, with David Corwin continuing as President.

The three-year distribution period for unsecured creditors commenced at the effective date, requiring Metropolitan to apply projected disposable income to creditor payments through 2028.

The post-emergence portfolio summary:

The case involved family ownership retention through Subchapter V, which differs from traditional absolute priority rules requiring full creditor payment before equity retention. Metropolitan achieved 97% creditor approval despite modest unsecured recoveries. The Fiesta 5 lease was not renewed, and the theatre transitioned to SBIFF.

Frequently Asked Questions

What type of bankruptcy did Metropolitan Theatres file?

Metropolitan filed under Subchapter V of chapter 11, a process for small businesses added to the Bankruptcy Code in 2019. Subchapter V eliminates the creditors' committee requirement, allows only the debtor to propose a reorganization plan, and permits equity retention even when creditors are not paid in full—provided projected disposable income is committed to creditor payments over a three- to five-year period.

How long did the bankruptcy case last?

Approximately 13 months—from the February 29, 2024 petition to the April 1, 2025 effective date of the confirmed plan. The confirmation order was entered on March 21, 2025.

Did the Corwin family retain ownership?

Yes. Under Subchapter V's modified absolute priority rule, the fourth-generation Corwin family retained 100% equity ownership despite unsecured creditors receiving only approximately 15.5 cents on the dollar.

What will unsecured creditors receive?

Non-insider general unsecured creditors receive approximately 15.5 cents on the dollar, distributed pro rata over three years from the effective date. Insider unsecured claims—including intercompany loans and stockholder obligations—receive approximately 7.3 cents, with the differential redirected to outside creditors. The total distribution pool is $775,000.

Who provided DIP financing?

David Corwin, the company's President and a family member, personally provided $1 million in DIP financing across two $500,000 tranches. The initial tranche was approved in June 2024, with an emergency second tranche approved in November 2024. Both convert to subordinated term loans under the confirmed plan.

What happened to the Park City theatres?

Redstone 8 Cinemas was sold to Larry H. Miller Megaplex Theatres as part of the bankruptcy, closing on July 1, 2024. The new Utah-based owners committed to hosting Sundance Film Festival screenings and planned luxury renovations. The sale ended Metropolitan's Utah operations.

What happened to Fiesta 5 in Santa Barbara?

Metropolitan declined to renew the lease with the City of Santa Barbara, which owned the property. The City Council voted unanimously in October 2024 to transfer the theatre to Roger Durling and the Santa Barbara International Film Festival (SBIFF). Metropolitan settled the City's administrative claim for $60,000 payable in installments.

Is the Arlington Theatre still operating?

Yes. The Arlington Theatre—which Metropolitan owns outright rather than leasing—was not part of the lease issues in the bankruptcy and remains the company's primary venue. As Santa Barbara's largest movie theater and principal performing arts venue, the 1931 landmark continues operations under Corwin family ownership.

What caused Metropolitan's financial distress?

A combination of factors: COVID-19 closures beginning in March 2020; the 2023 Hollywood strikes reducing film releases; reduced theatrical attendance with 15-20% of regular moviegoers never returning post-pandemic; above-market lease obligations of approximately $2.6 million annually; and streaming competition alongside shortened theatrical windows. The company received over $12 million in government pandemic assistance.

How much were professional fees in the case?

Total professional fees approached $1.1 million over the 13-month case. Loeb & Loeb (debtor's counsel) accounted for $960,740, with the Subchapter V Trustee receiving $33,660. Other professionals including real estate consultants, accountants, and special counsel made up the balance. Loeb & Loeb agreed to reduce its final fees by $45,000 to facilitate plan implementation.

Who is the claims agent for Metropolitan Theatres?

Donlin Recano & Company, Inc. serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

For more insights on major bankruptcy cases and restructuring developments, visit the ElevenFlo blog.