Member Info for Hexam

Poor - you said yourself "There is no point diluting, if you can’t raise significant amount of money". This is describing a placing or RI is it not? But they ARE diluting via a debt to equity swap which will mean shareholders are diluted 'very significantly'

My point is that some (like yourself) are saying dilution can't happen because they can't raise enough money [at the current sp] but I'm saying that is not what is happening here. They are issuing equity in return for additional financing/lower debt. So it is dilution - we will own X% of the company, the lenders will own Y%. X will be smaller than Y but we don't know by how much.

Wolf - I don't think the new debt will be existing debt plus $1.9bn even though at least some of it appears to be new cash as they say it is "provided by certain existing lenders, which will be used to, among other things, fund the Group's operations and refinance certain prepetition funded indebtedness.". Equally I don't think all the new debt will be just $1.9bn - unless a really big haircut is taken?

Wolf - Unfortunately it's like banging your head against a brick wall. People are still talking about placings and rights issues and how they can't do a raise at this mcap or shareholders will need to vote on a rights issue etc. None of this applies but they can't get out of the equity raise mindset - which this isn't. I think some are in for a nasty surprise.

One question though. You seem to be suggesting the debt is being reduced to $1.9bn. My reading though is they have got $1.9bn of additional financing (so new cash and new debt) but I would thought at least some of the existing debt would remain?

PI - they ARE diluting but they are NOT doing an equity raise (they are simply getting funds from lenders, $1.9bn in new financing, and reducing existing debt. In return the lenders will get a big slice of the new look CINE and existing shareholders will be left with a little slice. Exact size of slices TBD.

Once again - that's talking in terms of a placing or rights issue. In a D4E the debtors will simply take a portion of the company in return for giving up some debt. That portion will depend on the amount of debt foregone and what they think the 'newco' that comes out of this is worth - which has nothing to do with the current sp/mcap.

"Need to issue around 30 billion new shares to get 1.24 billion."

That's not how D4E works.

You've got to be kidding me. Strong results? No dilution? The mind boggles.

"Dilution isn't going to happen straight away and certainly not at this price"

Why not? We're not talking about a rights issue here or probably even a placing. In a debt for equity swap the current sp is irrelevant.

Wolf - For clarity I don't have an issue with it being shown as a liability with an NPV on it - it is calling it a 'debt' in the same breath as loans that I think is misleading as people just translate it as they already owe $9bn and all the headlines that go with it (usually in the Motley Fool etc.).

Wolf - No head stuck in the sand, just thinking in everyday common sense terms rather than as an accountant looking at whatever the rules of the day say.

Is it a financial commitment. Yes. Agreed.
Do they 'owe' money. No - as the rent hasn't fallen due yet. (Exception being deferred/unpaid rent of course)
Is any interest paid. No

As you say it is something that clearly needs to be borne in mind when looking at financials but to call it 'debt' in the same bracket as money borrowed from banks etc. is very misleading in my view.

Likewise I wouldn't class the 'asset' that is shown in respect of the leases in the balance sheet in the same bracket as assets in respect of property actually owned.

You're including lease liability which is not a debt as it is not money they owe or pay interest on. It is a future expense that is given a current value for accounting purposes (and it is also given an asset value too).

It's not $9.3 bn either. Have another go.

"Cine made near £80m on National Cinema Day"

This seems very high. Is there a link to this number - I'd be surprised if they reported it anywhere?

As to the other 16 points full marks for ramping but it would be just as easy to put a negative spin on every one of them.

"and they will be paying more for all of these"

Possibly - but nowhere near 80% so as I said, 'the fact that running costs for cinemas is over 80% higher than pre-covid' is not a fact at all but absolute nonsense.

Really EspecialC - so their only running cost is electricity? No staff? No food costs. No payments to film distributors? No rent?

"Another variable is the fact that running costs for cinemas is over 80% higher than pre-covid"

A 'fact' that is, in fact, absolute nonsense.

“I think they've set monthly rolling Bitcoin Put Options at a price that will cover their costs,
from the sounds of it, it's 24k, “

$24k is nowhere near enough to cover their costs at the moment.

Also there is a cost to such options and the salary of the guy hired so there is no guarantee they will be beneficial overall but they are very sensible as part of managing risk.

The Q2 costs per BTC mined were around $50k but that was distorted by some particularly poor mining numbers (especially May) and includes non-cash costs.

Nevertheless they are still losing cash each month so typically will need to sell more than they mine each month from an already low HODL. From memory they also need pay $25m-$35m for the 0.9 EH from the intel rigs.

So yes, definitely some significant near term risks but as you say, eased a bit by the reduction to the Galaxy Loan.

"wolf does seem like a nice chap. He's backed up his point with hard facts from rns to highlight the fundamentals on cine...pretty impressive ...surprised it was missed in 2021 report. Imho"

It wasn't missed. Everything Wolf has posted relating to the 2021 accounts, especially the going concern parts of those accounts and those referring to the Cineplex judgement were reproduced and discussed at length.

The expectations that CINE had at that time for admission levels were also discussed and if they hit those expectations CINE believed it would be more than enough to meet their obligations as a going concern. They also highlighted the risks (including on the judgement, admissions falling short and assumed rent deferrals not being granted).

The one thing we now know is that they fell short of those revenue expectations given that BO numbers were well behind those targeted. We don't know yet about the other assumptions/risks but just the revenue shortfall itself has been enough to cause the current problems. So they outlined the position, the assumptions and the risks and as LTHs we made our choice - I'm not sure what repeating them now achieves? They said if they fell short they'd be in trouble. They have fell short and guess what - they're in trouble.

Quiggers - the point I was trying to make is that it is not, in my view, the deficit of current assets versus current liabilities that is causing the issue or is a particular sign of the issue. The deficit is fairly typical for this business given the reliance on leased properties (the short term loans are less than $200m - hardly that onerous).

If CINE had come closer to their revenue projections then they would have had more than enough to pay their rent and meet all their other costs as well as their loan obligations.

So I don't think there's a need to look any deeper than a business that just hasn't recovered quickly enough from Covid and has just fallen short of the revenue it required. This has created short term liquidity problems, which need to be dealt with, and will translate into longer term problems if that recovery doesn't come at all. I'm confident that recovery will come (assuming studios up their output) but less confident they can overcome the short-term liquidity headache that may grow even worse with he court case. It just depends just how deep those issues are and what pressure is coming from the lenders. We shall know more very soon I think.