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Cineworld creditors have approved a controversial restructuring plan to slash or cancel rents in a bid to save the cash-strapped cinema chain’s UK business, which entered administration last year.
The company, which operates 101 cinemas in the UK, on Friday informed creditors, including landlords and lenders, that an agreement had been reached, according to two people familiar with the matter. A vote on the proposal took place earlier this week.
The approval marks a step forward in Cineworld’s restructuring plan but still requires approval by a court. A sanction hearing will take place on September 26 when a judge will decide on whether creditors will be left better off than if Cineworld were to become insolvent.
Cineworld did not immediately respond to a request for comment. AlixPartners, who were acting as an adviser for the process, declined to comment.
Cineworld expanded as the cinema empire developed by the Greidinger family grew through a series of acquisitions, including Cinema City in 2014 and US-based Regal Cinemas four years later.
However, the pressures of the pandemic quickly turned its $8.8bn in debt and lease liability into a burden, prompting it to file for Chapter 11 bankruptcy protection in the US in 2022. Cineworld delisted from the London Stock Exchange last year after its share price collapsed and was taken over by its lenders through a debt-for-equity swap.
Cineworld had warned that should the plan not be approved it would be unable to make payments, including its quarterly rent and insurance of £19.1mn, due this month, and would be likely to have no choice but to file for another administration.
The company argued that a “significant” number of its UK leases are currently set at a higher rate than the actual market level.
Cineworld had requested that 33 sites have reductions in their rents, with the new amount being calculated in line with current market value, while 10 sites should pay rent of around 50p for every ticket sold, according to the restructuring proposal.
Six sites would only be financially viable if they paid no rent, the plan’s documents said. They proposed that Cineworld’s parent company invest £16mn to fund Cineworld’s immediate liquidity needs, with plans of further funding of up to £35mn for refurbishment. Cineworld has already announced it will close six cinemas.
The restructuring document named The Crown Estate and British Land as being among Cineworld’s landlords. The Crown Estate declined to comment. British Land did not immediately respond to a request for comment.
Some landlords opposed the plan. One landlord, which declined to be named, argued ahead of the vote that the terms were unfair and would allow lenders to take cash funded by landlords.
