South Korea-backed CGV Vietnam has filed a lawsuit against its landlord Lapen Investment Advisory JSC for failing to accommodate its request for more lenient lease arrangements due to the COVID-19 pandemic.
|CGV Vietnam and Lapen failed to reach a common voice |
District 1 People’s Court in Ho Chi Minh City has just admitted the dispute between the cinema giant (plaintiff) and Lapen Investment Advisory JSC (defendant), the developer of Lapen Center.
According to the lawsuit, CGV Vietnam on November 21, 2017, signed a land leasing contract with the Lapen Center shopping mall (Vung Tau) to open a cineplex for the duration of 20 years at a leasing cost of VND413 million($17,956) per month.
The two sides cooperated without issue until the pandemic interrupted the performance of the cineplex.
The cinema company stated that at the time they signed the contract, they could not foresee the pandemic. CGV added that it tried various solutions but was unable to improve its finances.
On October 29, 2020, CGV Vietnam sent a document to Lapen proposing to renegotiate the lease contract, with the aim of reducing financial damage. According to local media, the cinema operator requested reducing lease to 8 per cent of its revenue in the shopping mall from December 1, 2020, to February 28, 2021, which would be followed by talks on a mutually acceptable monthly payment. According to the proposal, in case they cannot reach a common voice, either side could choose to unilaterally terminate the contract without having to pay compensation.
However, since the end of February, the two sides could not reach an agreement. Therefore, the South Korean-invested company filed a lawsuit against the landlord, requesting the court to put an end to the contract as there had been a material change in circumstances. CGV Vietnam claims to no longer have an obligation to pay a fine or compensations to Lapen. It has also decided to return the premises to Lapen and is requesting the deposit of VND2.2 billion ($95.652) from the company, according to the document.
Due to the health crisis, the cinema company has been struggling to maintain operations in Vietnam. According to Chang Bok Sang, chairman of CJ Vietnam which directly operates CGV Vietnam, the cineplexes have born the worst damage of all 15 company members in the country.
The global performance of CGV cineplexes has also been poor. According to newswire Business Korea, its debt-to-equity ratio soared by nearly 200 percentage points in three months to 845 per cent in the first quarter of last year, with its total capital falling 22 per cent during the same period. Compared to a year ago, sales were halved and net losses increased from KRW85.7 billion ($70.6 million) to KRW118.6 billion ($97.76 million).