Cineworld Group — the world’s second-largest movie chain operator and owner of Regal Cinemas — has filed for Chapter 11 bankruptcy, according to a company statement.
Axios reported yesterday that Cineworld, which said last month it was considering bankruptcy, had filed the Chapter 11 case in the U.S. Southern District of Texas Bankruptcy Court.
In a statement released last month, Regal Cinemas, which operates in 10 countries, including the U.S. and UK, said a lack of big-budget movies negatively impacted admissions and could last until November, warning of a looming bankruptcy filing.
Regal Cinemas shut down all 500 of its locations twice as a result of the COVID-19 pandemic, following a cascade of postponements for big-budget Hollywood films.
“We are like a grocery shop that doesn’t have vegetables, fruit, meat,” Cineworld CEO Mooky Greidinger said in an October 2020 interview with The Wall Street Journal. “We cannot operate for a long time without a product.”
Regal Cinemas’ area locations include the Regal Majestic, which was renovated in 2017, as well as theaters in Rockville, Germantown, Laurel, Bowie and Hyattsville, Washington, D.C., and Arlington, Va.
The company’s full statement is below:
Cineworld Group plc and its subsidiaries (the “Group”) (LSE: CINE), a leading cinema operator in 10 countries including the United States and the United Kingdom with 747 sites and 9,139 screens globally, today announced that Cineworld and certain of its subsidiaries (collectively, the “Group Chapter 11 Companies”) have commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of Texas (the “Court”).
As part of the Chapter 11 cases, Cineworld, with the expected support of its secured lenders, will seek to implement a de-leveraging transaction that will significantly reduce the Group’s debt, strengthen its balance sheet and provide the financial strength and flexibility to accelerate, and capitalise on, Cineworld’s strategy in the cinema industry. The Group Chapter 11 Companies enter the Chapter 11 cases with commitments for an approximate $1.94 billion debtor-in-possession financing facility from existing lenders, which will help ensure Cineworld’s operations continue in the ordinary course while Cineworld implements its reorganisation.
As previously announced, it is expected that any de-leveraging transaction will result in very significant dilution of existing equity interests in the Group and there is no guarantee of any recovery for holders of existing equity interests. The Company does not expect the Chapter 11 filing to result in a suspension of trading in its shares on the London Stock Exchange.
The Group Chapter 11 Companies expect to file a proposed plan of reorganisation (the “Plan”) with the Court in due course and to meet the necessary requirements to emerge from Chapter 11 as expeditiously as possible. Cineworld currently anticipates emerging from Chapter 11 during the first quarter of 2023 and is confident that a comprehensive financial restructuring is in the best interests of the Group and its stakeholders, taken as a whole, in the long term. Cineworld looks forward to working with its creditors and stakeholders to advance the Group’s efforts to restructure its balance sheet.
As part of its restructuring process, Cineworld expects to pursue a real estate optimisation strategy in the US and intends to engage in collaborative discussions with US landlords to improve US cinema lease terms in an effort to further position the Group for long-term growth.
Chapter 11 is a court-supervised process that will provide a forum for efficient reorganisation of the Group’s business and balance sheet. The Group Chapter 11 Companies will remain in possession and control of their assets, existing management and the board of directors will stay in control of the business and the Group’s operations will be allowed to continue uninterrupted.
Upon filing for relief under Chapter 11, the Group Chapter 11 Companies benefit from an “automatic stay” against any action to litigate or collect a pre-petition claim. Cineworld expects to operate its global business and cinemas as usual throughout this process.
Cineworld’s subsidiaries and affiliates not engaged in the US, UK or Jersey businesses were not included in the filing and are not part of the Chapter 11 process.
Mooky Greidinger, Chief Executive Officer of Cineworld, said: “We have an incredible team across Cineworld laser focused on evolving our business to thrive during the comeback of the cinema industry. The pandemic was an incredibly difficult time for our business, with the enforced closure of cinemas and huge disruption to film schedules that has led us to this point. This latest process is part of our ongoing efforts to strengthen our financial position and is in pursuit of a de-leveraging that will create a more resilient capital structure and effective business. This will allow us to continue to execute our strategy to reimagine the most immersive cinema experiences for our guests through the latest and most cutting-edge screen formats and enhancements to our flagship theatres. Our goal remains to further accelerate our strategy so we can grow our position as the ‘Best Place to Watch a Movie’.”
Business as Usual
During the restructuring process, Cineworld expects to operate its global business and cinemas as usual without interruption. In conjunction with the filing of the Chapter 11 cases, the Group Chapter 11 Companies have filed certain customary “first day” motions to obtain the requisite court authority for the Group to continue operating its businesses in the ordinary course without disruption to its customers, vendors, suppliers or employees as much as practicable. The Group Chapter 11 Companies intend to pay all vendors and suppliers in full and on normal terms for valid amounts for goods and services received during the Chapter 11 process. In addition, the Group expects that employees will continue to receive their usual wages and benefits without interruption.
Cineworld has secured commitments for an approximate $1.94 billion debtor-in-possession (“DIP”) financing facility provided by certain existing lenders, which will be used to, among other things, fund the Group’s operations and refinance certain prepetition funded indebtedness. Subject to Court approval, the DIP financing, together with the Group’s available cash reserves and cash provided by operations, is expected to provide sufficient liquidity for Cineworld to meet its ongoing obligations, including post-petition obligations to vendors and suppliers, as well as employee wages, salaries and benefits programs. Cineworld and its brands around the world – including Regal, Cinema City, Picture House and yes Planet – are continuing to welcome customers to cinemas as usual, which will not change during the Chapter 11 cases. The Group expects to continue to honour the terms of all existing customer membership programs, including Regal Unlimited and Regal Crown Club in the United States and Cineworld Unlimited in the UK. Mooky Greidinger added: “I am deeply grateful for the continued support of our stakeholders throughout this process and beyond, including our dedicated team members, loyal guests and members. We look forward to continuing to provide guests and members with the best cinematic experiences for years to come. The outstanding success of recent blockbusters such as Spider-Man: No Way Home; No Time to Die; Top Gun: Maverick; Dune; Minions: The Rise of Gru; Thor: Love and Thunder and others proves clearly that people love to go to the movies and that, once supply of product returns, our business will reap the benefits.”
Additional Information Regarding the Restructuring Process
Given the international nature of the Group’s business, certain aspects of the de-leveraging transaction to be pursued in the Chapter 11 cases may require ancillary implementation proceedings beyond the Chapter 11 cases. No final decision has been taken in relation to whether any such ancillary implementation proceedings are to be pursued in this case, and any final decision will be subject to a number of factors, nor has a decision been taken on the timing of any such process. However, the possible ancillary implementation proceeding that may be used by the Group in this case could include, among other things, a restructuring plan or a scheme of arrangement under Part 26A or Part 26 (respectively) of the UK Companies Act 2006, or other ancillary proceedings in the UK or other key jurisdictions alongside the Chapter 11 cases in order to achieve the objectives of the restructuring. A further update on this point will be provided in due course.
The lenders providing the DIP financing have also agreed to provide funding through the DIP financing for the purchase by a newly incorporated Group company of the outstanding commitments under the Rest of World facility (being the facility advanced to fund the Group’s operations in Poland, Romania, Hungary, the Czech Republic, Bulgaria, Slovakia and Israel). This debt transfer is expected to occur in the near term, following which the newly incorporated Group company will be the sole lender under the Rest of World facility. It is expected that the terms of the Rest of World facility will be further amended at such point. In order to facilitate implementation of this arrangement, the existing lenders under the Rest of World facility have agreed to forbear temporarily in exercising certain of their rights triggered by the Chapter 11 filings. As a result of these arrangements, the Rest of World group entities will not commence Chapter 11 cases or any equivalent local proceedings at this time. A further update will be provided in due course.
Additional information on the Chapter 11 cases (including copies of all documents filed in the Chapter 11 cases) can be found at https://cases.ra.kroll.com/cineworld.
PJT Partners LP is providing financial advice, Kirkland & Ellis LLP and Slaughter and May are acting as legal counsel and AlixPartners LLP is serving as restructuring advisor to Cineworld. A further announcement will be made when appropriate.
The person responsible for arranging the release of this announcement is Scott Brooker, Company Secretary.
Source file photo
Cineworld is taking steps to position our company for the future. Our cinemas remain open around the world, and we continue to welcome guests to the “Best Place to Watch a Movie.” Learn more: https://t.co/LeKH5WJZ95 pic.twitter.com/X8c9se20IT
— Cineworld (@cineworld) September 7, 2022
We are expanding our coverage, and we need your help. Click here for more information.