Cineworld owns the Regal cinema chain and is the second largest movie theater operator in the world. Its shares are listed in the U.K.
In a filing on Monday, Cineworld said that it had entered into a restructuring support agreement and a ‘backstop commitment agreement’ with those lenders responsible for 83% of the group’s term loans due in 2025 and 2026 and for a revolving credit facility due in 2023.
If implemented, the proposed restructuring would be expected to reduce by $4.53 billion the indebtedness of the group’s subsidiaries that are subject to the U.S.’s Chapter 11 strictures. It would do this principally by a debt-for-equity swap, with the lenders accepting shares in exchange for relinquishing their claims.
However, the proposed restructuring does not provide any relief or recovery for holders of Cineworld’s existing equity interests, the company said. In fact, their holdings would be diluted.
The filing made no mention of a potential sale of its assets in the U.S., U.K and Ireland, though this is known to have been explored.
Similarly, the filing made no mention of management changes at Cineworld. Over the weekend the Financial Times reported that Cineworld’s creditors are preparing to remove the CEO, Mooky Greidinger.
The deal would also be expected to raise $800 million of gross proceeds, through a fully backstopped equity offering to the legacy lenders and a direct equity offering to them.
Further, the deal would provide $1.46 billion in new debt financing to the Chapter 11-affected subsidiaries when they emerge from Chapter 11.
Via a backstopped rights offering, the lenders are expected to be offered, pro rata to their holdings under the legacy facilities and subject to meeting certain eligibility criteria, the right to purchase shares in the reorganized group in an aggregate purchase amount of $400 million.
The proceeds of the rights offering and the exit facility will be used to repay in full the approximately $1.94 billion debtor-in-possession financing facility entered into by the Chapter 11 companies when they commenced their Chapter 11 cases; fund the costs associated with the Chapter 11 companies’ emergence from Chapter 11; and fund their forward business operations.
Greidinger said: “This agreement with our lenders represents a vote-of-confidence in our business and significantly advances Cineworld towards achieving its long-term strategy in a changing entertainment environment. With a growing slate of blockbusters and audiences returning to cinemas in increasing numbers, Cineworld is poised to continue offering moviegoers the most immersive cinema experiences and maintain its position as the best place to watch a movie.”
The company also proposed that, along with the ongoing Chapter 11 cases, it will change its accounting reference date and financial year end from Dec. 31 to June 30, effective for the 2022 financial year.
Cineworld Group and its subsidiaries had commenced Chapter 11 cases in the United States Bankruptcy Court in September 2022.
In early trading on Monday, Cineworld shares had dropped by more than a third to GBP1.94 apiece.