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...and I think you meant creditors

"I agree with a lot that you say, however my main contention with you is the valuation of the company and how the debtors will move forward with it."

But these are bits I agree completely with Wellington on - so genuinely puzzled if you agree with Wellington on these things but not with me.

Stanley - Basically the worse the outcome for CINE the more the increase in debt effectively is so the weaker I feel CINE's negotiating position will be. Likewise a really good result and their position is much stronger. Quantifying the impact of any of this is a different matter though. I'd like to think a really good result would have a big positive impact but just don't know - partly depends I suppose on what the lenders are already factoring in?

Hi Wellington - Again agree with much of what you say in another well thought out post.

One question though is do the shareholders have to agree a D4E in these circumstances? I know this is normally the case but in Ch11 doesn't it come down to the judge to decide on what he thinks is the best (or least worst) solution after hearing all the arguments? After all it's unlikely there will be any proposal that all stakeholders will agree on.

What is confusing Poor? As I said I’m agreeing with Wellington and he’s said he’s agreeing with me. It’s very straightforward.

- Like me he thinks there will be a D4E
- We agree on the method of valuation
- We agree on the sort of level of that valuation will be but also that it is a large possible range
- We agree not all of the debt is likely to be involved
- We agree that shareholders could come out of this well (compared to today’s SP) but this depends on the valuation and the percentage taken by the lenders
- We agree though that we don’t know what this percentage will be and that it depends in part on the strength of the business and in particular the court case (though I’m more bullish on this).

So there’s no confusion here so not sure why you are trying to introduce any?

The only thing I’m confused about is why you are now agreeing with the above when you didn’t when I said them? I can only put it down to poor explanations on my part and for that I’m sorry.

@Wellington - great post and indeed, yes, I am vigorously agreeing with you.

I’m bemused though that Poor is agreeing with you when he disagrees with me so much when I say the same thing. You obviously put it much better than me and I’m just glad he’s finally got the message.

The only thing I disagree with you on is the appeal. If we are unsuccessful in that I don’t think it’s necessarily game over, just that much harder.

Thanks again for getting the whole D4E thing across in a way that I clearly failed to do. In future I’ll just refer anybody to your post and say ‘that’s what I mean’ :)

“Hexam, that’s exactly what you and wolf are saying.”

It most definitely isn’t. If they have 100% of the equity they will receive the $3-4bn spread over the next 10-20 years as the profits emerge. They would only get it sooner if they sold the business to someone else.

I’m not muddling things up. I am describing Discounted Cash Flows - nothing else.

Unlike mcaps (which is I think what you are thinking of) these do not change significantly over time unless you change your FUTURE assumptions. They just go up steadily at discount rate used.

‘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.

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?’

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.

“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.

Stanley - September is bad as you say but it is made to look worse by the nearly $(300m) you quote under 'other' which is actually the taking over of the ROW debt.

Tegop - the $0.8m loss you're quoting for H1 2022 is the adjusted EBITDA after lease payments. The comparable figure for H2 2021 was actually a profit of $158m.

The overall loss for H1 2021 before tax was $319m though compared to a loss of $132m in the second half of last year.

So I'm afraid things actually got a bit worse - but I agree with the rest of what you say.

Ian - "How do you know this will make a profit in ten years let alone next year. etc."

I am struggling to make sense of your post as it is so contradictory that I'm not sure point you're making and comes across as incredibly bearish which I didn't think you were.

The $2bn comes from an annual profit figure of around $200m which I think is very prudent for a CINE with no debt as it is only about half the comparable profit pre-covid profit. So not fanciful at all?

If they don't make close to this kind of money then in your scenario how are they going to pay back $5bn (now $6bn) of debt over 20 years? They wouldn't even get close if cash flow is so weak.

If the lenders think like you that the prospects of CINE are so bleak then I'm afraid it is game over. I think you are wrong though and CINE can still be a viable, highly profitable business - hopefully the creditors think so too.

Hi AllKap,

I think a D4E is inevitable but unless the dilution is very close to 100% there should be more value for existing shareholders than the sp today. The lower the dilution the higher the value obviously. This is because I believe a low debt, streamlined CINE is worth well in excess of $2bn if the film slate returns to normal levels (which I think it will).

There is a very real risk though that a deal is not reached and the creditors just fight over the assets - or they take 100% of the company in the D4E. In both these cases we get nothing.

So I'm holding and have averaged down to 16p now. I may average down a bit further and am also trading it too to try and recoup some losses that way - but I recognise the significant risks of doing this and am keeping a close eye on the developments in the Chapter 11 process and, in time, the court case. Strategy may change as news emerges.

I wouldn't dream of telling anybody else what to do with their money but I would urge them to understand what is an unfamiliar situation to many so that they can make the most appropriate decision given their own circumstances and risk tolerance.

I find it really disturbing and disheartening though that so many people are posting misleading information with such apparent conviction - both the trolls ('it's all over, you've done your money etc.') to the 'rampers' ('they can't do a D4E as the sp is too low' etc.). Hopefully people will not be swayed by the 0p mob or the £1 crew and will do their own research before acting.

So GL to all of us who continue to search for answers - less so to those trying to lead others astray.

Ian,

Do you really think the value of all CINE’s profits over the next 10 to 20 years, with comparatively little or no debt, a full film slate and cost savings they will undoubtedly be making, is a lot less than $2bn or as you put it ‘minimal’?

If you do then what on Earth are you doing investing in this company? Maybe it’s just your obsession with HSBC?

“You are missing the point.
Cineworld debt free will not be worth 2 billion.“

I totally disagree - if that was the case then there really would be no hope for CINE as you are saying the lenders have no prospect of even seeing even a fraction of there money ever again. A wind-up would be inevitable.

I’m sorry but I think you simply do not understand how businesses are valued in these circumstances. It is not mcap or the value of assets but DCF based on future profits.

You are making the same mistake as Spurs312 but arguing the other way.

What they are interested in is the value of the post-restructured business which I believe will be higher than $2bn. So giving up some debt for 90% of that for example seems to me very attractive versus winding up the company and getting little or nothing back from the sale of what few assets there are.

For the 1,435,286th time the current sp and mcap is of absolutely no relevance in the D4E negotiations.

Yes, I believe there will be a dilution but it is clear you do not understand D4E. For example the post restructuring valuation could easily be something like $2bn (personally I think it will be higher but just my view).

The dilution could easily be 90% for example.

That would leave existing shareholders with 10% of a $2bn valued business i.e. $200m which works out at about 15p per share - much higher than today’s sp so shares would be worth more than they are today.

Of course the valuation could be less and the dilution greater in which case the shares could be worth less than today.

Or a deal cannot be agreed at all, the company folds and we get nothing.

Lots of possibilities but one thing for sure is that it is your comments that are ‘criminal’ as they are professing certainty of outcomes that are not certainties at all and are a result of your own misunderstanding (if being kind) or maliciousness (if not).