Cineworld Group Reaches Agreement with Creditors to Potentially Exit Bankruptcy
Cineworld Group Reaches Agreement with Creditors, Nears Exit from Bankruptcy
Debt-laden cinema exhibition giant Cineworld group has announced that it has reached an agreement with its creditors that could potentially lead to its exit from Chapter 11 bankruptcy proceedings. The company, which owns the Regal cinema chain and is the second largest movie theater operator in the world, has been struggling with financial challenges amid the ongoing pandemic.
In a filing on Monday, Cineworld revealed that it had entered into a restructuring support agreement and a ‘backstop commitment agreement’ with lenders responsible for a significant portion of the group’s term loans and revolving credit facility. The proposed restructuring, if implemented, would reduce the group’s indebtedness by $4.53 billion through a debt-for-equity swap, with lenders accepting shares in exchange for relinquishing their claims.
However, the proposed restructuring does not offer any relief or recovery for holders of Cineworld’s existing equity interests, as their holdings would be diluted. The filing did not mention a potential sale of the company’s assets in the U.S., U.K, and Ireland, although this option has been explored in the past.
The deal is also expected to raise $800 million through an equity offering to legacy lenders and provide $1.46 billion in new debt financing to the subsidiaries affected by Chapter 11. Additionally, a backstopped rights offering will allow lenders to purchase shares in the reorganized group.
Cineworld CEO, Mooky Greidinger, expressed optimism about the agreement, stating that it represents a vote of confidence in the company’s business and aligns with its long-term strategy in the evolving entertainment landscape. The company also proposed changing its accounting reference date and financial year end to June 30, effective for the 2022 financial year.
Cineworld Group and its subsidiaries filed for Chapter 11 bankruptcy in the United States Bankruptcy Court in September 2022. Following the announcement of the agreement with creditors, Cineworld shares dropped by more than a third in early trading on Monday.
The company’s move towards restructuring and potential exit from bankruptcy signals a significant development in its efforts to navigate the challenges posed by the pandemic and position itself for future growth in the cinema industry.