The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
The studios are spending massively on new films. For theatrical release. Building new studios, such as Sky studios in Elstree by Comcast. And all round the country. You have no idea the financial commitments they are pledged to. Even the stuff for streaming is costing them a small fortune. Masters of the air’s budget ballooned to £400 million, due to over spends.
Except there is numerous first lien lenders. One of whom is the main landlord.
They are as hoc for a reason. They cannot agree amongst themselves.
Best thing for a future company is reduce rent and cut the number of sites. Streamline the business. The landlord would be opposed to this.
Mooky for all his sins knows the state of his lenders and the state of the industry as a whole.
He has a strategy in mind. Now to what ends, only he knows. But when they entered chapter 11 , he said they would leave at the start of the year. Now he is saying in the middle of this year. He seems to keep dragging the process longer and longer.
Yea. But companies in the ad hoc which there are many are not going to keep all the debt they owe in lending to Cineworld on their books. They will transfer that across.
Can see some of these companies go bankrupt in the future. Then where does that leave Cineworld. Could follow Flybe, leave bankruptcy only to go bust again.
Now I know technically this new company should have reduced debt. But like AT&T did with Warner bros discovery, they shifted some of their debt onto the new company. The ad hoc lenders will do the same thing.
Hence why I feel there will be concerted efforts by them to sell Cineworld off as a whole, even if Mooky wants to cling to power anyway he can.
That is normally the case. But those that lent to Cineworld , borrowed off the banks to do so. So the debt will remain the same, just different owners. Plus the interest they are paying will go up, due to their changing circumstances.
One of the first lien lenders is the main American landlord. The mortgage on the properties was meant for them to be rented out and not owner occupier.
Does anyone know the outcome of the ad hoc cleaninsing court session yesterday?
Court session today is for Ad Hoc cleansing. Hence why is might not show up.
Lenders having their say and also payoff second lien lenders in full.
You swap the money you are owed for shares in the company. But that means you become the new owners of the company and have to then finance the company. This does not mean the money you borrowed to lend to this company goes away. They still have to pay the banks back. Only now their circumstances have changed and the banks can increase the interest on their loans to them accordingly.
I am interested in today’s court session. All the narratives have been from Cineworld.
The Ad hoc lenders have remained quiet.
I believe they have no interest in d4e. And feel anger and frustration at Cineworld’s conduct throughout this ch11 process.
First lien are meant to buy out second lien’s debt in full. This was agreed upon and that the company was to be sold.
I hope the judge takes a more active role in the sale process.
I feel Cineworld sabotaged the last effort. By only putting forward the ROW for sale and only listening to non-binding offers.
If you were bidding, to show you were a motivated and serious bidder, you would submit a bidding offer. Maybe not your highest bid, but in the middle. So clearly something strange was being played out as not one binding offer was submitted.
Waiting to see what transpires from today’s court session and will go from there.
What i do not get is why people think that d4e will result in a debt free new company.
The new company will start with 6 billion debt.
That is because they borrowed off the banks to lend to Cineworld.
One of the first lien lenders is their main landlord in America. Their mortgage is for them to rent out the building not to become owner occupier.
But you say then surely the interest this new company will pay will be less.
No. Because the circumstances they find themselves in has changed to when they borrowed the money. They now find themselves in a high risk venture. The banks will increase the interest rates accordingly. They could end up paying higher interest rates than Cineworld currently do.
So all a d4e will do is change Cineworld being 6 billion in debt.
To newco being 6 billion in debt.
That is why I am interested in tomorrow’s court session.
Goldman Sachs for one.
Ad hoc group have all different goals. There is no unity and no appetite taking on Cineworld. They will be pushing for a sale. Looking at a 4 billion dollar haircut. Which could see some of them go into bankruptcy. They will still owe the banks the full amount they borrowed to then lend onto Cineworld.
Tomorrows court session will be the most intriguing and could tell more about the future than when Cineworld are in court.
Goldman Sachs still hold 2.75% in Cineworld. I am sure their lawyers and traders know more about the prospects than most. Polaris sold out, as did Jhango. But no else did. So feel still hope for the company. Interested in seeing what comes out from Monday’s court session.
Am suspect of Cineworld when they release information. Previously the company was doing this and crashing the share price down to 2p only for it to recover. Last time Mooky released a press release. The judge read them the riot act. So now they are using their in house lawyer. So in the eyes of the law, someone slightly different. Resulting in the same outcome. Saying the same stuff as before.
None of the lenders has even released anything perpetuating about swapping debt for equity at any point. All this has come from Cineworld’s side. Monday is key as I expect the lenders to find their voice and express their anger mistrust in Cineworld and their general conduct.
The first lien lenders are paying off the second lien lenders in full. They are not doing this to lose billions in a debt for equity swap. They too have spoke to interested parties about selling Cineworld. So they know their are buyers out there. Wait till after the court session Monday. Things might look slightly different then.
Representation, but lenders did not speak. All discourse came from Cineworld’s lawyers as far as I am aware. Monday is when they clear things up. Then we will know their course of action or desires. Thursday was about sales proposals. Although with confidentiality clauses. No one knows whom bid or what was in the sales advertisement sent out to them.
Monday will be the true test. This will be the first real time the lenders let the courts know their stance. From that might show a better future for Cineworld or a darker one. I feel it might show their is still life in Cineworld. Either way this is not over yet. Plenty more twists and turns to come.
Cue had debts of 551 million and 221 sites.
Cineworld has debts of 6 billion and 751 sites. Plus Vue only had two private equity companies take it over.
Cineworld has 4 or 5, one of whom is the landlord for most of its sites in America. The Ad hoc group are names as they have completely different interests and objectives. Also neither of them can buy the others out or finance the running of this.
Mooky knew how disjointed they are and is using this against them.
Monday will see the second lien lenders get paid out in full by first lien lenders as part of the agreement signed in October.
The Ad hoc group will then delay any discussions of debt for equity till May and after the completion of the sales process in April.
Basically delay as much as they can. Like Mooky is doing.
They may also ask the judge to lead the sale process as they believe Cineworld is not a genuine seller and that all proposals from now on our both binding and go through the judge alone.
Wait till after Monday and if the above does come out. As well as the lenders stating that they have received offers for all of Cineworld.
Then maybe buy in on Tuesday and wait it out.
This is not a simple cut and dry case. Lots of technicalities that has not been put forward and make this a difficult case for all concerned.
Also everyone is missing the Elephant in the room. This is a UK company using chapter 11 in America.
Can anyone give me examples of UK companies doing this before? As UK laws and regulations are still valid over Cineworld. No one has touched on this yet, as the proceedings have not progressed where they have needed to act. I am sure the judge has some awareness that legally things are complicated by the UK courts ruling against the proceedings in America.
Hence steering for a sale, as this would get approval from UK shareholders and judiciary alike.
I would say wait till after Mondays court session. So much toxicity with this company. Also lenders owe banks, taking debt for equity will not stop them owing the banks. With them needing to invest billions to run the company. Which they do not have. Can see them not wanting D4E. They want this company sold and their debts paid off. Some of the lenders themselves are fighting off bad debts and potential bankruptcy. So this is not as clear cut as people think.
My advice wait till after Monday and see which way the wind is blowing.
The court session Monday will indicate if there is any hope.
I feel lenders do not want debt for equity. Will make this known Monday.
AMC struggling with debt. Studios tried to screw cinemas and now need them operating fully for them to continue. This still has plenty more ups and downs to come. The road will be bumpy. Will see how much blood will be spilled before a good resolution is found.
There will be no suspension . This will keep trading.
Monday is key. This is when the lenders can have their say. They do not want debt for equity. Only Cineworld has been bringing this up. Then the market tanks afterwards for a few days and the recovers. The lenders have borrowed off the banks. So if they do a debt for equity and the new company has a value of say 2 billion debt free. They lose 4 billion, but still owe the banks 6 billion as well as interest payments.
Not only that, they then have finance the running of the company and renegotiate all previous deals by Cineworld such as box office percentages with the studios.
So could be facing initial to eat further into their finances.
Then you also have the cost of listing it on the stock market and the new listing being exposed to market forces. The share price can crash and they are the ones left with the pieces.
There best solution is to negotiate with any buyers to put in place a deal to pay their debt over four or five years.
That said I would wait till after Monday’s court session to see whether buy back in.
I feel this weekend there will be a lot of film executives having meetings over Cineworld. lots of companies need Cineworld intact and operating successfully. GLA