US bankruptcy judge grants Cineworld access to less money than cinema operator wanted as it explores future


A U.S. bankruptcy judge has granted Cineworld Group, the parent company of Regal Cinemas, and its subsidiaries access to hundreds of millions of dollars — far less than Cineworld wanted — in funding to help keep the chain going. Struggling cinema throughout Chapter 11 bankruptcy proceedings and ponders its future.

UK-based Cineworld Group, the world’s second-largest cinema operator, has filed an application Chapter 11 bankruptcy protection last week to restructure its finances in the face of a lingering pandemic crisis in ticket sales. The company, which has 747 locations and 9,139 screens in 10 countries, plans to negotiate with creditors over its debt of at least $5 billion and renegotiate some US leases.

Cineworld plans to present its real estate optimization plan to the U.S. Bankruptcy Court for the Southern District of Texas in Houston by mid-October and is considering a sale if no plan materializes, new chief restructuring officer told court from Cineworld, James Mesterharm.

“We may have to go through a sales process, but we hope to come to a consensus plan,” Mesterharm said.

Judge Marvin Isgur granted the company access to up to $785 million in debtor-in-possession financing from lenders including Blackstone Alternative Credit Advisors, Cyrus Capital Partners and Credit Suisse Asset Management during day one hearings from Cineworld last week. The amount approved is less than the $1.94 billion debtor-in-possession financing originally proposed by Cineworld.

The judge reviewed the initial proposal and sent stakeholders back to the drawing board to rework the debtor-in-possession financial package to delay repayment of $1 billion in old debt until the end of October. By delaying the repayment term, it gives Cineworld a chance to evaluate other funding options and potentially find a better deal, the bankruptcy judge said.

Cineworld CEO Mooky Greidinger said the approval of the initial funds is a positive step forward for the company’s restructuring and positions it for long-term growth.

Cineworld has over 500 leases in the United States, primarily under the Regal brand. The company plans to further optimize its leased real estate through bankruptcy court, an effort the company and its subsidiaries began at the start of the pandemic as discussions continue with landlords to improve lease terms. Last week, Cineworld filed a motion to initially dismiss 20 leases in a dozen states across the United States, which is expected to save the company about $12 million, according to court documents.

Global movie ticket sales may not return to pre-pandemic levels for at least a year, according to industry analysts’ estimates. Cineworld has been paying landlords large amounts of deferred rent since the pandemic began in March 2020. According to court documents, Cineworld estimates that its average monthly rent obligations per theater increased by nearly 30% for the first half of this year. year compared to the full year in 2019.

Cineworld, like other movie theater operators, has been hit hard financially by the pandemic after months of government mandates, limited capacity restrictions and Hollywood studios delaying blockbuster theater releases. Additionally, they have faced increased competition from streaming services. Other US theater operators such as Studio Film Grill and Alamo Drafthouse filed for bankruptcy protection due to ramifications stemming from the pandemic and used the court to get out of leases.

“There just aren’t enough ‘Top Guns’ or ‘Spidermans’ out there,” said Joshua Sussberg, a partner at law firm Kirkland & Ellis who is representing Cineworld in the Chapter 11 bankruptcy proceedings. , in bankruptcy court last week. “A weak movie slate” through the third quarter of 2022 and the rise of streaming present a still-challenging operating environment for theater operators like Cineworld, Sussberg said.

Cineworld has asked the bankruptcy court to dismiss its lease at Regal Plaza in Las Vegas. (Zachary Mirer/CoStar)

The original judge-approved debtor-in-possession loan, coupled with available cash reserves and cash provided by operations, should provide Cineworld with enough cash to remain operational and pay vendors, suppliers and employees throughout the bankruptcy proceedings. Worldwide, Cineworld has nearly 30,000 employees.

Cineworld’s major creditors include Twentieth Century Fox Film and Walt Disney Co., as well as owners such as Teachers Insurance and Annuity Association of America, National Retail Properties Inc. and Brookfield Properties Retail Inc.

Robert LeHane, a partner at Kelley Drye & Warren LLP in New York who represents the owners of more than 100 Cineworld sites in the case, told the bankruptcy judge that his clients were looking for a happy ending to Cineworld’s bankruptcy, these owners being long term. partners in the cinema exhibitor business, and cinemas often helping to anchor their commercial properties.

Of the 20 initial leases that Cineworld is proposing to reject through the court, the company plans to abandon its personal assets at the premises, according to court documents. The leases are “unnecessary and burdensome to debtors’ assets” and will reduce high fixed operating costs, according to court documents. If the bankruptcy judge agrees, the leases could be thrown out this month. The 20 initial leases that could be rejected include the following:

California: 8030 E. Santa Ana Canyon Road, Anaheim Hills; 3351 W. Shaw Ave. in Fresno; 4767 Commons Way in Calabasas; 2525 San Ramon Valley Blvd. in San Ramon; 3735 Alton Parkway in Irvine;

Connecticut: 495 Union Street in Waterbury; 85 Voluntown Road in Pawcatuck;

Florida: 6415 N. Andrews Ave. Fort Lauderdale; 12884 Downtown Blvd. in Jacksonville;

Michigan: 5330 West Saginaw Highway in Lansing;

Missouri: 754, boul. Gravois Bluffs in Fenton;

Nevada: 8880 South Eastern Avenue in Las Vegas;

North Carolina: 750 SW Greenville Blvd. in Greenville;

Ohio: 18348 Bagley Road in Cleveland;

Oregon: 15995 SW Tualatin Sherwood Road in Sherwood;

Pennsylvania: 185 North West End Blvd. in Quakertown;

Texas: 8275 Amarillo Blvd. W in Amarillo; 9828 Great Hills Trail in Austin; 700 West Oaks Mall in Houston;

Washington State: 5910 South 180th St. in Tukwila.

This is the first wave of lease denials after Cineworld “undertook an in-depth analysis of its U.S. lease portfolio” and the company plans to continue to identify unprofitable U.S. movie locations, said Cineworld in court filings. A&G Realty Partners is negotiating on Cineworld’s behalf with landlords on potential lease modifications.

A final hearing on day one orders for the legal case involving Cineworld and 104 affiliated entities is scheduled for October 6. Cineworld hopes to emerge from bankruptcy by the end of the first quarter.

Cineworld’s monthly rental obligations in the United States total about $60 million, most of which had not been paid for September, with some owners potentially also not having been paid in August, said Mesterharm, who is also the managing director of AlixPartners, in court.

With only about $4 million left in Cineworld’s accounts to pay for its ongoing operations, Mesterharm told the bankruptcy judge that the company was “running on steam” and that it was imperative for Cineworld to withdraw from the hearing with the necessary funding to ensure the company’s proximity. long-term business operations and to compensate its large employee base.

“With only $4 million available, it’s not enough to fund Chapter 11 or pay for significant operating expenses that are due daily and monthly,” Mesterharm told the bankruptcy court. “There is a lack of cash that needs to be funded and debtor-in-possession financing provides funds to debtors for operations and also provides funds to cover the cost of the restructuring process.”

Meanwhile, bankruptcy is further complicated by a pending judgment in a Canadian court related to Cineworld’s failed takeover of Toronto-based Cineplex. Kirkland & Ellis’ Sussberg told the bankruptcy court that Cineworld was appealing the Canadian court’s decision. The appeal is due to be heard by a judge in mid-October, Sussberg said.

The legal dispute dates back to before the pandemic when Cineworld plans unveiled in December 2019 to buy Cineplex, Canada’s largest cinema operator, in a C$2.18 billion deal. Cineworld pulled out of the deal about six months later. The Ontario Superior Court of Justice ordered Cineworld to pay Cineplex C$1.24 billion in damages in December 2021 due to the loss of synergies anticipated by the merger of the two operators.

If an appeals court fails to rule in favor of London-based Cineworld, it could further complicate the company’s bankruptcy process and put a heavy lien on the cinema chain’s business, according to filings. . Cineplex said it’s actively look at the bankruptcy case and hired legal counsel to carefully review Cineworld’s bankruptcy records.


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