National CineMedia Files for Chapter 11

The nation’s largest cinema advertising network, National CineMedia, announced tonight that it has filed a voluntary Chapter 11 petition in the U.S. District Court for the Southern District of Texas – where one of its largest shareholders and customers, Regal parent company Cineworld, has just filed has. one filed a lawsuit filed restructuring plan. of the bankruptcy itself.

Cineworld submitted an application in September and is hoping for approval by the end of May. National Cinemedia’s process should move faster as it has already filed a comprehensive restructuring agreement, already in hand and backed by secured lenders, which provides “a clear road map … to exit quickly without disrupting operations or customer relationships influence.” “.

The move is not a shock. The company recently missed and extended the grace period for an interest payment that was originally due in mid-February, putting it technically already in default with major rating agencies and sparking speculation about a possible Chapter 11 or out-of-court restructuring. has. Last fall, the auditor raised concerns about its ability to continue operations, and the stock price fell to penny stock levels. The company took its time to recover from the theater closures during Covid and a slow box office recovery. Cineworld sought to terminate or restore a long-term contract between National Cinemedia and Regal as part of the bankruptcy.

The agreement means that all the company’s debt will be converted into equity. It will take over critical contracts upon discharge from Chapter 11, and the current administration will be retained to ensure continuity.

“Today’s transactions will enable us to deliver the strong results that our advertisers and film partners have come to expect from us today and into the future,” said CEO Tom Lesinski. “We are entering this process with the overwhelming support of our secure supporters and key stakeholders who we expect will enable us to quickly and responsibly emerge as a stronger company.”

Converting all of the company’s funded debt into equity will reduce the balance sheet completely. The holding company NCM will have an ownership stake of approximately 14% in the restructured entity. Unless a formal creditors’ committee is formed, all general unsecured debt holders will be paid in full in the normal course of business under the RSA. The company will continue to operate with existing cash on hand, which provides liquidity.

After the restructuring, it will be “well positioned as moviegoers enjoy the resumption of a regular schedule of major film releases after a pandemic disruption.”

In fact, the move comes just as the box office peaked with last weekend’s release The Super Mario Bros. Movie, the biggest debut of the year on opening weekend.

The company also submitted a so-called first-day directive for approval, which contains requests for wages and benefits to be paid to employees. It will continue to maintain its existing customer programs, partnerships and relationships with cinema operators as part of normal business operations.