Cineworld reaches conditional deal with backers to exit Chapter 11

Regal’s owner, Cineworld, has entered into a restructuring support agreement and a reverse commitment agreement with the lenders, which will exit bankruptcy if approved.

The stock exchange giant also announced today that it had received non-binding offers for some or all of the group’s assets, but stated that in the absence of a cash offer significantly in excess of the value set under the proposed restructuring, it will stop looking for a buyer for its activities in the US, Great Britain and Ireland. The chain will continue to review the proposals received for its rest of the world business. A process is underway with the bidders for these companies to determine whether an acceptable sale transaction can be completed.

If implemented, the proposed reorganization is expected to reduce the funded debt of the group’s Chapter 11 companies by approximately $4.53 billion, primarily because the legacy facility that granted lenders equity in the reorganized group as consideration received for the release of their claims.

It will also generate total gross proceeds of $800 million through a fully secured equity offering to the so-called “legacy lenders” and a direct equity offering to some of them. The reorganization will also provide the group’s Chapter 11 companies with $1.46 billion in new debt as they appear from the Chapter 11 cases.

Proceeds from the rights issue and exit facility will be used, among other things, to fully repay the approximately $1.94 billion financing facility entered into by the group’s Chapter 11 companies and those related to the litigation and ongoing matters to finance associated costs.

Cineworld CEO Mooky Greidinger described the restructuring as “a vote of confidence in our company” which “will significantly advance Cineworld in executing its long-term strategy in a changing entertainment environment with audiences returning to cinemas, Cineworld stands ​​ready to continue to offer moviegoers the most immersive.” To offer cinematic experiences and maintain its position as the ‘Best Place to Watch a Movie’.”

In accordance with the Company’s February 24 announcement, given the amount of existing debt expected to be written off under the plan, the proposed reorganization does not provide any refund to holders of Cineworld’s existing equity interests.

Cineworld said it expects to emerge from Chapter 11 in the first half of 2023, but any sale deal could delay that, among other things. The group said they remain committed to resolving matters “as soon as possible”. The plan is subject to approval by the required thresholds of Chapter 11 corporations and the US Bankruptcy Court for the Southern District of Texas.

Cineworld filed for bankruptcy at this court last fall. This allowed Regal to close theaters and renegotiate leases with landlords. Last week, Judge Marvin Isgur said he would stick to an April 20 appointment to discuss the plan and set May 26 as the confirmation date.

The lenders in question own and control around 83% of the controversial company’s term loans, which mature in 2025 and 2026, as well as a revolving credit facility which matures in 2023.