Dear Mr. Berko: When my dad passed away last month, he had a CEC Entertainment Inc. bond among his effects. I can't find any record showing its value. It's a $10,000 bond that comes due in February 2022, with an 8 percent interest rate. The only CEC I can find is a company that does building inspections, engineering work and surveying. The stockbroker I called has never heard of it and thinks it's worthless. What can you tell me about this company, and why would my dad buy this bond?
— CL, Joliet, Ill.
Dear CL: I can tell you that this broker should return to his original job as a lineman at the roach paste factory. CEC Entertainment is the parent company of Chuck E. Cheese's family restaurants, which are alive and well. CEC Entertainment was acquired by Apollo Global Management (APO-$34.75) in 2014 and stopped trading on the Big Board. I'm often a kid at heart, and I've had some rockin' good times at Chuck E. Cheese's. And I know that most normal kids still do. However, I don't know why your dad had that bond. Perhaps his waiter at Chuck E. Cheese's was a stockbroker during the day.
Some dozen-plus years ago, when one of my granddaughters had her 11th birthday, I rented a big bus with a Michael Jackson look-alike entertainer, and our driver took her, with a group of 23, to Chuck E. Cheese's. What a hoot! Everything – all the games and pizza – was on my nickel. The kids had a smashing blast. The games and prizes were screaming fun. The noise, near rock band level, and the pizzas were as good as you could want them to be. Even I had a royal blast – that is, until I was given the bill from the party planner I had hired. I nearly fainted over the pepperonis. All told, the birthday party's cost came to $66.43 per chum. We ate lotsa pizza, and we played lotsa games. I had a few drinks, and I may have overtipped.
Chuck E. Cheese's first location opened in May 1977 in San Jose, California. Interestingly, the CEC concept was created by Nolan Bushnell, the co-founder of Atari. From the time of the company's inception to today, one of the main attractions to the restaurants has been their arcade ambiance. Bushnell Corp. (which makes some of the best rifle optics) is responsible for CEC's delightful menagerie of games. CEC was the first restaurant to integrate food, arcade games, animated entertainment, amusement rides and animatronic displays as a focus of family entertainment. The various distinctive brass tokens used by the company have become collectors' items. Subsequently, these tokens have been replaced at participating locations by a card called a "Play Pass."
When APO decided to acquire the 577-unit family dining and entertainment company in 2014, it offered $54 a share, or $950 million, and CEC became a privately held, wholly owned subsidiary of APO. CEC Entertainment, headquartered in Irving, Texas, now has 608 Chuck E. Cheese's venues and 149 Peter Piper Pizza locations and over 17,000 employees. Its restaurants serve thousands of pizzas every day and have expanded their menus to include wings, subs, wraps, platters, salads and gluten-free options.
APO may take CEC Entertainment public in the next few years. And because revenues and earnings are significantly higher, the APO people should at least triple their investment with an initial public offering. Meanwhile, your $10,000 8 percent bond is junk, rated CCC. It has a market value of about $9,000 and pays $400 interest twice a year, on Feb. 15 and July 15. You will get seven more of these $400 checks. The last interest check will be Feb. 15, 2022, and you'll also get a redemption check for $10,000, so everything will be peaches and gravy.
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