Cineworld's creditors have approved a contentious restructuring plan aimed at reducing or eliminating rent obligations in an effort to rescue the company's UK operations, which entered administration last year.
The company, which runs 101 cinemas across the UK, informed creditors, including landlords and lenders, on Friday that an agreement had been finalised, according to two sources familiar with the situation, as reported by the FT. A vote on the proposal was held earlier this week.
The approval represents progress in Cineworld's restructuring efforts but still awaits court approval. A sanction hearing is scheduled for Thursday (26 September), where a judge will determine if creditors stand to benefit more from the restructuring than they would if Cineworld were to enter insolvency. Cineworld has not yet responded to requests for comment, and AlixPartners, acting as advisers in the process, declined to comment.
Cineworld grew through a series of acquisitions, including the purchase of Cinema City in 2014 and US-based Regal Cinemas in 2018, expanding the cinema empire built by the Greidinger family. However, the financial pressures of the pandemic soon made its $8.8 billion in debt and lease obligations unsustainable, leading the company to file for Chapter 11 bankruptcy protection in the US in 2022. Cineworld was delisted from the London Stock Exchange last year after its share price plummeted, and the company was taken over by its lenders through a debt-for-equity swap.
Cineworld had warned that if the plan was not approved, it would be unable to meet payments, including £19.1 million in quarterly rent and insurance due this month, and would likely have to file for another administration. The company argued that a “significant” portion of its UK leases were set above the current market rate. As part of the restructuring proposal, Cineworld requested rent reductions for 33 of its sites, with the new amounts adjusted to reflect current market values, while proposing that 10 sites pay rent based on approximately 50p per ticket sold.
The restructuring plan stated that six of Cineworld’s sites would only remain viable if they paid no rent. It also proposed that Cineworld's parent company invest £16 million to address the company's immediate liquidity needs, with plans for additional funding of up to £35 million for refurbishments. Cineworld has already confirmed the closure of six cinemas. The restructuring documents identified The Crown Estate and British Land as two of Cineworld’s landlords. The Crown Estate declined to comment, while British Land did not respond to a request for comment. Some landlords opposed the plan, with one unnamed landlord arguing before the vote that the terms were unfair and would allow lenders to benefit from cash funded by landlords.
