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Hexam, you are muddling up everything. Even I’m confused now :-).
Don’t mean to be patronising, me and you are friends from another board remember, it’s just how I write. Apologies if offended.
‘Wow - just a point - you seem to give the impression that lenders are desperate to get their 5bn back in the short to medium term….why would they all of a sudden be wanting to do that?’
Who’s saying that? I’m certainly not - nor is Wolf.
Wow - just a point - you seem to give the impression that lenders are desperate to get their 5bn back in the short to medium term….why would they all of a sudden be wanting to do that? If CW turned around and said we are never going to pay you now or something like that I’d understand the breakdown in the relationship….but at worst all
We are facing is potential difficulty in making some repayments in the short term….reasonable
Lenders would
Usually support you through sticky cash flow issues especially if the future outlook was good.
You don’t seem to understand the concept of a forward valuation using Discounted Cash Flows. CINE TODAY if it had no debt is worth perhaps $3-$4bn. This is by valuing all future profits in years 1, 2, 3 up to year 20 and possibly more.
In two years time the only difference is you’ve already received the profits/losses for years 1 and 2 and the other years are closer.
In other words if you are saying the expected value of the business in two years time on a DCF basis is $3-4bn then you are saying the value of the business is broadly similar now (strictly speaking it’s roughly lower by two years at whatever rate you are discounting future cash flows at).
That’s how DCF works and that’s the method they will use to value the business.
To use your patronising phrase ‘Do you comprehend?’
Wolf, I have been in business a long time And I explained to you a long time ago, I’m an expert in maths. This scenario you have put down, will never materialise. The lenders, will have to negotiate on today’s value and you have to remember, there are many lenders. When a big company is up for bankruptcy, their future financial projections are irrelevant, they have no money, they either raise money on their future projections or the fold. And if they fold, no one gets anything because the company ain’t worth that much.
Let me simply fly for you, if you can’t pay your mortgage, the bank will start repossession of your house, then they sell your house, pay of the mortgage, if there is any shortcomings, you have to settle, if you can’t settle, you declare bankrupt, bank doesn’t get the rest of its monies. The house will not be sold for it’s future value, it will be sold for market value.
Apologies for spelling and grammar, too many whiskey’s.
Jeff - I can’t put it any simpler than this for you. This is one of the first lines in the C11 RNS:
“Cineworld Commences Chapter 11 Cases with approximately $1.94 billion in Debtor-in-Possession Financing Commitments to Facilitate a Significant De-Leveraging Transaction and Position Company for Long-Term Growth”
The important bit:
“to Facilitate a Significant De-Leveraging Transaction”
This is the D4E transaction. It is the reason for the C11, hearings, DIP finance. It all has one aim - to push this through.
They are only meeting their current obligations due to the DIP finance which is being provided by the very lenders who stand to benefit from the D4E. Please have a think about this.
Poor - sophisticated investors do not value a company based on SP, they value a company on the value of its future free cash flow. You and many others keep going on about SP and raises but it’s completely irrelevant.
The lenders are owed £5bn. They know they are not going to get this back in the short to medium term. But if they forgo a large portion of what they are owed a much debt reduced CINE without all the interest payments and trading back at pre covid levels may be very profitable. So the question then becomes how much of the company can be given to the lenders to take on that new risk and what would be the best chance of them getting their money back and maybe more.
So for example if the £5bn was 100% wiped and the debt free syme made £300m profit pa, a PE of 10 as a basic example might value the new company at £3bn. In this scenario you would think they would have 100% of Newco and shareholders would get nothing.
So they would be £2bn out of pocket but would enjoy the future growth, possible dividends, etc, in the new company.
It’s job of Mooky now is to balance the debt and the new holding in newco to try and retain as much of the shareholding as possible.
So maybe the lenders could write off £3bn of the debt but have 90% of Newco, etc, etc. These numbers are hypothetical of course. Existing shareholders would have 10% of Newco. In this scenario newco will be worth less though because it has retained £2bn debt and would have interest payments.
Last attempt.
Hexam, at the moment the company isn’t worth much. That means today. However, if the allow to let the company continue, another year or two, it should be worth a lot more then 5 billion.
Do you comprehend?
Ah so you agree. The company is worth $3-$4bn to the lenders so making a D4E very possible. Glad you’ve finally got it.
Fooking hell hexam, what are you smoking? That’s exactly what I’m saying, forward looking ffs. The company needs to run for the loan companies to get their money back, otherwise they will make huge losses. Ffs please understand:-)
“How are you valuing cine at 3 or 4 billion pounds?”
On a forward looking valuation of future profits. Hopefully the lenders’ maths is better than yours or else we’re doomed.
Wolf you need to take the blinkers off and look at the legal side of it.And look at all possible angles
Again D4E is NOT in the terms of cashed raised.
So again if they MEET financial obligations they dont have to give anything away they can exit chapter 11 and carry on
Theyve been speaking to lenders and raising money but theyve got the next big hurdle Cineplex which could be the game changer either way
ATB ;-)
Yes theyve been talking to lenders for years and always got a pass from what I can see. So as long as they can prove they still have the ability to run a profitable business and movies will steadily get back to normal then why would they bail now. It makes no sense. Lenders make money by earning on money theyve lent - why would they take a massive hit now when they have a very high probability of actually getting their capital back and more with a bit of patience.
Had this been Debenhams, they could rightly argue - well the high street is dead so how are you planning on getting people in...or thomas cook - well yes everyone is booking online now through a plethora of options and resources, so your uSp is drying up.....then yes in those cases they coudl arguably cut their losses. But why would you take billions in loss because after everything you cant see out another 6-12 months....
We are also in quite a peculiar situation as there is a $1bn 'is it payable/is it not payable' bill which frankly needs to be ironed out....so CW are probably being told to go get thsi sorted. I would imagine looking weak, battered and hopeless is more likely favourable in the appeal room rather than yeah our lenders will always support us no matter what!
Wolf, let me make this simple for you, how much equity do you think there is in cine?
You know how much debt there is. Let me give you an example, Regal was bought for 3.5 billion, it was profit making at the time, now it is making huge losses, what do you think it’s worth now?
If they let the company run, it will be worth 3.5 billion or more in a couple of years. Why would they not do that?
Bullbears - they’ve been talking with lenders for years.
The purpose of the C11 is to facilitate the D4E. It’s as simple as that. Read the C11 RNS have a look through some of the court dockets, detail around the DIP financing.
Wolf, we all understand this, we all can read RNS’s. What we are saying to you, how are they going to give a significant portion of the company for that massive debt? I have explained numerous times now, the company is making a loss, it needed a few 100 million just to get through the next few months.
You are failing to understand, the company isn’t worth the debt at the moment. I repeat, at the moment, they need to run this company, mostly intact to get most of their money back.
How are you valuing cine at 3 or 4 billion pounds? Do you think the debt companies will settle for a few hundred million? Mate you need to brush up on your maths.
Come 21st October - Black Adam comes out, followed in quick succession by two further superhero movies Black Panther and Shazam - followed then in mid Dec by Avatar 2.
It is very likely each one of those is going to make a packet.
Im going to repeat something ive said a few times, connecting the dots - the guy in charge of this, with total insight - Mooky - could have cashed in/salvaged something much more substantial way before rather than pretty much intentionally allowing the SP to tank and then facing what many are pretty much describing as obliteration.
wow - so lets say come February and CW are looking at exiting C11 - due to:
- A favourable agreement or decision with CPlex
- November onwards the film slate has delivered and cash flow is good and the forecasts are looking very optimistic going forward
- CW have managed to negotiate some lower rents
What happens then? The company is still shredded through a massive D4E by current lenders? You really think Mooky will still have no other option but to have his and family legacy completely obliterated? Or do you think its possible some lenders (existing or new) might say 'come have a chat with us and lets see how we can figure this out - we'd consider getting involved in a business very likely to make £1oom's in profits annually...'
Mate you seriously aren’t understanding this. They are reconstructing the balance sheet. So in turn for a significant reduction in the debt the lenders with be given a significant portion of the company.
The company cannot be given any more money to turn this around, that ship has sailed.
Wolf, compared to the debt, the assets aren’t worth that much at the moment. This company is a money pit at the moment, the idea is to lend them so they turn it into a profit making company so their assets are worth what they are supposed to be.
Powerfader, I have a lot more in now, especially after today.
100k
Poor - the secured lenders - the ones offering up the facility will be the main decision makers on a) whether the D4E is successful or b) be first in line in the event of liquidation when it comes to distributing assets.
They haven't offered the money up out of the kindness of their hearts, it's a power play to take control of the process. There are all sorts of limits on what Cine can and can't do with the money and it's all outlined in the dockets attached to the Kroll site.
Google Chapter 11 DIP finance - this kind of thing happens all of the time, this is just more profile because it's a British company. We are not seeing some completely unprecedented situation play out.
Powerfader, what do you consider big?
Can I please ask if you have a big holding in this share?