Cineworld Clears First Hurdle in Restructuring Plan

Cineworld, the troubled exhibition giant, has cleared the first hurdle in its bid to get its controversial restructuring plan over the line.

High Court Approves Plan Meetings

At the High Court in London on Wednesday (Aug 28), Justice Edwin Johnson agreed to make the order convening the “plan meetings” on September 18, thereby approving the process to move on to the next stage.

A sanction hearing is then due to be held around September 26. If Cineworld landlords vote against the restructuring plan in sufficient numbers, that hearing won’t take place, although this isn’t expected to happen.

Landlords Face Tough Decisions

Landlords were contacted on July 26 with a “Practice Statement Letter” detailing a court-supervised Part 26A plan, which, if accepted, will result in sharp reductions in the current rent landlords receive from Cineworld at some sites and with landlords getting zero rent at others.

The landlords now face some tough decisions. It is not in their interest to defeat the restructuring plan as this will almost certainly lead to formal insolvency and a huge loss of value for stakeholders as well as further Cineworld cinemas being closed (following the six sites already announced).

Restructuring Plan Details

Cineworld, which emerged from a Chapter 11 bankruptcy in the US in September 2022, is seeking to avoid insolvency in the UK where it has 101 sites. The exhibitor is arguing a “significant number” of its UK leases are currently over-rented, meaning the exhibitor believes the contractual rent is more than market rent.

The restructuring plan aims to address this issue by reducing rents and providing a more sustainable financial future for the company.

Challenges and Concerns

However, some landlords have expressed concerns about the plan, citing a lack of visibility of data and the threat of Cineworld ripping out seats and seizing control of projectors at sites that don’t fall in line.

Some landlords feel they have not been given enough time or information to mount a challenge, with only 32 days between the sending of the Practice Statement Letter and the Convening Hearing.

Conclusion

Cineworld’s restructuring plan is a complex and contentious issue, with both benefits and drawbacks. While the plan aims to provide a more sustainable financial future for the company, it also poses significant risks for landlords and other stakeholders.

FAQs

Q: What is Cineworld’s restructuring plan?
A: Cineworld is seeking to restructure its UK leases to reduce rents and provide a more sustainable financial future for the company.

Q: Why is Cineworld seeking to restructure its leases?
A: Cineworld believes that a significant number of its UK leases are currently over-rented, meaning the contractual rent is more than market rent.

Q: What are the potential consequences of rejecting the restructuring plan?
A: If the restructuring plan is rejected, Cineworld may be forced to enter formal insolvency, which could result in a huge loss of value for stakeholders and further cinema closures.

Q: What is the timeline for the restructuring plan?
A: The plan meetings are scheduled to take place on September 18, with a sanction hearing due to be held around September 26.