Cineworld, the world’s second-largest cinema chain, has announced plans to file for administration of its listed entity Cineworld plc in the UK as part of its proposed restructuring following Chapter 11. However, its operating companies will continue business as usual without interruption. Administration is an insolvency process similar to a bankruptcy process. Cineworld had already filed for bankruptcy protection in the US in September and is expected to emerge from Chapter 11 in the first half of July in the US.
The proposed restructuring plan will transform the group’s balance sheet and provide significant additional liquidity to fund its long-term strategy. The plan will involve the release of approximately $4.53 billion of the group’s funded indebtedness, the execution of a rights offering to raise gross proceeds of $800 million, and the provision of $1.46 billion in new debt financing. Despite the level of existing debt that is expected to be released under the plan, it does not provide for any recovery for holders of Cineworld’s existing equity interests.
Implications of the Restructuring Plan
Cineworld Group’s administration application would only apply to itself as the listed parent company of the group, and not to any of the operating companies or subsidiaries under it. The group’s employees’ status or rights will not be affected by the administration process, and operations will continue as usual.
After applying to the UK’s Financial Conduct Authority, Cineworld Group expects the listing of its shares to be suspended shortly following any decision by the Board to make an application to appoint administrators, currently expected to take place in July. The company also expects to cancel its London listing and share trading at 8:00 am on the business day following the actual appointment of administrators.
Once administrators are appointed, they will transfer substantially all of Cineworld Group plc’s assets to its wholly-owned subsidiary, Crown UK Holdco Limited. A newly incorporated company controlled by the group’s lenders will become the sole owner of Crown, with Cineworld Group plc ceasing to have any interest in Crown or the rest of the group. Although the restructuring plan is intended to allow the group’s business to emerge from the Chapter 11 cases as a continued going concern, it will not rescue Cineworld Group plc itself.
Cineworld continues to operate its global business and cinemas as usual, and this will not be affected by the entry of Cineworld Group plc into administration. The terms of all existing membership programs, including Regal Unlimited and Regal Crown Club in the US and Cineworld Unlimited in the UK, continue to be honored. Cineworld’s brands, including Regal, Cinema City, Picturehouse, and Planet, are continuing to welcome customers.
As reported earlier this month, executives of Cineworld, led by CEO Mooky Greidinger, have agreed to a payout in the $30 million range if they leave the company as it prepares to exit Chapter 11.