Cineworld’s parent company, based in the US, has announced plans to invest £35m into modernizing its British cinema estate. This investment is contingent upon the success of a proposed rescue plan, which is currently being presented to creditors.
According to sources, the decision to inject additional funds into the British cinemas is aimed at helping Cineworld catch up to more successful competitors. The proposed funding was outlined in a document circulated to Cineworld’s creditors, who are set to vote on the restructuring plan next month. The plan could potentially result in the closure of several UK multiplexes.
As stated in the document, “The US Group will provide a further £35m of additional investment to the UK Group, if the restructuring plans are sanctioned by the court, to be used for capital expenditures, including refurbishment and enhancement of viable cinemas.”
The news of the proposed investment comes at a time when there are growing concerns about the ability of dissatisfied landlords to block the restructuring plan. In fact, earlier this month, it was reported that British Land, which owns three Cineworld sites that would be affected by the proposals, was considering voting against it.
A convening hearing is scheduled to take place next week, with a creditor vote set for late September. A spokesperson for Cineworld commented on the restructuring plan, saying, “The restructuring plan will provide Cineworld in the UK with the opportunity to obtain further funding to meet its working capital needs, reduce its liabilities, and to benefit from a significant capital expenditure programme from the group.”
Cineworld has already announced plans to close six of its UK multiplexes. However, documents circulated to creditors reveal that nearly 50 others require revised rent deals with landlords in order to ensure their long-term viability. The proposed plan states that 33 sites, categorized as Class B, will require a reduction in rent in order to remain financially viable.
Furthermore, 38 of Cineworld’s cinemas would be unaffected by the restructuring, while another 16 Class C1 and C2 leases require rent reductions to maintain financial viability. The company has also reported that it lacked the necessary funding to meet its quarterly rent bill of £15.9m on June 24th.
“The UK group did not have sufficient liquidity to make the June 2024 Rent Payment and required further funding from the US group to meet this liquidity need. Absent this funding, the UK group would have been insolvent on a cashflow basis,” the company stated.
Initially, Cineworld had engaged in discussions with potential buyers to sell the business. However, after failing to secure any viable offers, the company has shifted its focus to a formal restructuring process. AlixPartners is advising the company on this restructuring.
It has also been reported that other cinema operators are prepared to step in and take over some of Cineworld’s sites. With over 100 locations in the UK, including the Picturehouse chain, and a workforce of 4,400 employees, Cineworld has grown into a global giant of the industry under the leadership of the Greidinger family. The company has acquired several chains, including Regal in the US in 2018 and the British company of the same name four years earlier.
However, the company’s multibillion-dollar debt has led to a crisis, resulting in Chapter 11 bankruptcy protection in 2022. Last August, Cineworld delisted from the London Stock Exchange after its share price collapsed due to concerns about its survival. In a deal struck last year, several billion dollars of debt were exchanged for shares, with a significant amount of new money injected into the company by a group of hedge funds and other investors.
Cineworld also has operations in central and Eastern Europe, Israel, and the US. Some of the major summer film releases in Britain include Despicable Me 4, A Quiet Place: Part One, and Alien: Romulus.
