Cineworld plans UK administration

September 2023 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

September 2023 Issue

Cinema chain Cineworld is to file for administration in the UK in July as part of a major bankruptcy restructuring plan.

In a statement outlining the company’s plan, Cineworld said its proposed restructuring would involve calling in administrators and could release approximately $4.53bn of its funded indebtedness, a rights offering to raise $800m and the provision of $1.46bn in new debt financing.

“The Proposed Restructuring, when implemented, will transform the Group’s balance sheet and provide it with significant additional liquidity to fund its long-term strategy,” the company said.

Administrators, once appointed, would shift all of the company’s assets to a wholly owned subsidiary called Crown, and a newly incorporated company controlled by the group’s lenders will become the sole owner of Crown, with Cineworld ceasing to have any interest in the parties.

As a consequence of its administration, the trading of Cineworld shares on the London Stock Exchange’s main market for listed securities would be suspended in July. The company’s existing shareholders are set to be wiped out by the arrangements, with the firm confirming it would “not provide for any recovery for holders of Cineworld’s existing equity interests”.

Going forward, Cineworld expects to continue to operate its global business and cinemas as usual and this will not be affected by the entry of the company into administration. The group and its brands – including Regal, Cinema City, Picturehouse and Planet – are continuing to welcome customers, and the terms of all existing membership programmes continue to be honoured, including Regal Unlimited and Regal Crown Club in the US and Cineworld Unlimited in the UK.

The company operates about 128 cinemas in the UK and the Republic of Ireland, and over 700 worldwide, with a large number across the US. It employs over 28,000 staff globally.

Cineworld applied for Chapter 11 bankruptcy protection in the Southern District of Texas in September 2022 and entered a company voluntary arrangement (CVA) in the UK as its debts piled up during the coronavirus (COVID-19) lockdown following an aggressive acquisition spree, culminating in a $3.6bn takeover bid for rival Regal in 2017, which left Cineworld holding $5bn of debt at a time when it was forced to close its doors.

As of June 2022, the company had $8.8bn of net debt on its books. The uncertainty caused by the pandemic, which halted the releases of many blockbuster films, had a dramatic impact on many cinema chains, as did the subsequent slow box office recovery. In 2022, Cineworld expected admissions in both 2023 and 2024 to remain below pre-pandemic levels.

The growth of streaming platforms has also negatively affected Cineworld, among others. Amid all of these challenges, Cineworld’s revenues fell from $4.4bn in 2019 to $1.8bn in 2021, while group adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) fell from $1bn to $455m.

Furthermore, a $959m court judgment against Cineworld for pulling out of a deal to buy Canada’s Cineplex chain – which Cineworld is appealing – only added to the company’s liabilities.

The company expects to emerge from Chapter 11 bankruptcy protection in July, having said in May that its proposed debt restructuring had the backing of most of its lenders.

In April, the group scrapped plans to sell its businesses outside the UK, US and Ireland after potential bidders failed to meet the value desired by Cineworld’s lenders.

Richard Summerfield