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Stock exchange has a ruling limiting the number of shares a company can issue. To stop abuse by companies issuing endless shares and making shares owned by share holders worthless.
I believe Cineworld are at there limit. Which is why they were looking to create a new company to bypass this.
But the judges ruling to block the lenders paying off their loans, kind of stopped this in its tracks.
By the wording from the lenders lawyers about representing 52% of the lenders. Which matters little as the other 48% hold over three quarters of the debt. But the other lenders are against the actions of these lenders in court. So the 19th will be interesting. But the 48% hold the power in the negotiations. So I expect no deal then.
Tell HSBC bank and Bank of Israel. They do not do debt for equity swaps and are the two biggest shareholders. The Times can print want they want. These two have consistently rejected this. The other lenders will need to pay off all the money owed to them, to make a debt for equity a reality.
People keep creating these fantasy figures around.
The reality is a debt for equity swap has been proposed numerous times before now. Anyone whom says this is not so, is delusional.
HSBC and Bank of Isreal have constantly rejected this. They do not do debt for equity. It is not in the banking charter and Modus Operandi.
Without there support a debt for equity cannot be done.
Cineworld have 784 million to keep running their business till it can support itself.
The chapter 11 is aimed at getting the landlords to reduce rents to a realistic level.
That is all that will happen. IMO
One final thing.
Say they do a debt for equity and value the company at two billion. Current Cineworld share holders get reduced to 10%.
This would give a valuation of their shares at 200 million. It currently sits at 40 million.
So shareholders would see there shares worth 5 times as they are now.
Who would not buy shares into Cineworld. It is a win win either way. Buy in for a guaranteed five fold increase on your investment.
Hexam you do know HSBC are the biggest lender to Cineworld to the tune of over two billion dollars?
They are in effect the first charge on Cineworld. The other lenders cannot supersede them. The new lenders tried by paying off their loans with the DIP. This was ruled illegal and failed.
You fail to take this massive thing into your reasoning. See things through their viewpoint. It will give you a better understanding of the situation.
How do you know this will make a profit in ten years let alone next year.
Where do you make up this fanciful 2 billion valuation?
HSBC share would be 40%, eight hundred million. So straight away lose 1.2 billion. Then both black panther two and avatar 2 are not the box office success of the previous incarnations and the losses grow. Do not forget they will not be debt free as have to pay off the 784 million and and other additional money in the DIP. The share price falls, triggering all the lenders to try and jump ship and sell off their shares quickly. The share price collapses. Now they are stuck, no one wants to buy their shares. They have in fact turned potential profit into realised losses.
There is no such thing as a guaranteed hit movie in the film business. If there was, the studios would not be in billions of debt.
HSBC will happily wait for ten or twenty years. Picking up the interest on their debt and get paid the full amount back over time. IMO
A wind up would see them lose it all.
As it is the new lenders have leant them enough to continue. If things turn in the future maybe a debt for equity.
But their worth at the moment without debt is minimal.
As I said if a debt for equity was a viable option, do you not think it would have already been done.
HSBC control any future actions in this regard and HSBC are never going to do a debt for equity swap. End of.
Also. HSBC if they suddenly lost their kind and agreed to a debt for equity swap would need over thirty percent of the companies shares to match its debt levels in the company. This pushing it over the 30% mark and forcing them to make an offer to buy the company. This is not in HSBC’s wheelhouse. Hence why a Debt for equity swap is not for them. Amongst other reasons. In that it also makes zero financial sense.
You are missing the point.
Cineworld debt free will not be worth 2 billion. They have no assets to back this claim.
Also you really think HSBC and bank of Israel would not have done a debt for equity swap before now. When there was some value to it.
The new lenders want this in the deal they tried and failed.
A normal debt for equity swap requires the big two and they have consistently refused this and will still refuse this even now.
There is nothing Cineworld or the other lenders can do without the big two and they are under no obligation to do it. A debt for equity is dead in the water at the moment. Give it a year or two. Then it may be possible. But makes ZERO sense for HDBC or bank of Israel as it currently stands.
What assets? There is minimal tangible assets. Debtors are not going to do a D4E as they will not recover any money. Why would they do this, when they can sit tight and recover their money over the long term. No debt for equity swap makes any sense at the moment. When the cinema industry has recovered and the share price is higher. Then maybe. At the moment this is the last thing they want.
Another factor which is stopping HSBC and the bank of Israel, say they do a debt for equity swap. The share price plummets. Which is can and probably will do. Remember shares can go down as well as up. They would then be tied in and their losses increasing. As it stands their debt is in their long term profit column. So better to keep it there and get paid back over the years. Than swap for equity as see it switch to their loss column and these losses to rapidly increase. There is now far more risk with no reward in a debt for equity swap. IMO
Company is only worth what it is now. Debt free still would increase value. As no tangible assets. People do not have to go to Cineworld. So cannot give a high valuation. They have lost respect, so the value of the brand is greatly diminished. The market will destroy the share price if debt for equity swap happens. Leaving the creditors highly exposed. HSBC and the Bank of Israel the main creditors are playing no part in the investors trying their schemes with Mooky in the chapter 11. They hold the key and will block any attempt at debt for equity swap.IMO
They cannot pay off their loan. The judge ruled against this. It was an illegal action. Hence why they now will only lend the 784 million..
Except it will not fold as now has 784 million fro the DIP. So as long as the big films do big business, they will soon be back making profit.
As for assets. There is only there name. Which now counts for nothing. Do not own property. Probably rent the projectors and sound systems. No assets or note, to even get close to a billion.
Someone explain how not only at these levels of Sp can a debt for equity be a good thing for creditors. But also with the regulations set in stone about the number of shares a company can issue. Which Cineworld are up to the max now. This will not happen. I feel there will be a massive ramp of this share to occur for anything like this to be attempted. Till then this is just a scare tactic with no foundation to it. IMO
Massive buy to end the day.
Jangho have now sold out completely. So nothing holding this back now.
Jangho selling up and then this share will rise. Just like AMC when Wanda group departed. AMC and Cineplex both up as Cineworld will still be operating. No Cineworld no Avatar 2 et al. Next few weeks bankruptcy hearing will see no more money put in. 784 million will be it. Investors cannot get their deal through so will stick at this loan at 20%. Then cineplex case and synergies cost gets removed and then finally landlords see sense and leases reduce. Debt for equity swaps makes no financial sense to creditors. Hence why it gets mentioned, but no one has mentioned any way this works out for anyone involved. IMO
The 1.94 billion was a DIP. That can only used to keep the business operating. Not for anything else. Hence why the judge ruled the payment of their loan was illegal.
I expect them to settle on just the 734 million with 20% interest. Payable when, I do not know.
The talk dilution was if this deal went through and Mooky could create a new company as such.
There is a long and difficult road ahead. With legal regulations stopping the Greidinger family stitching up shareholders. Not too mention HSBC ensuring they get paid back their two billion eventually. IMO
Because the bad PR if they pulled out would have a massive detrimental effect on their business. Not to mention they have a one billion dollar exposure, of which is behind a lot of creditors. They will get nothing if Cineworld went bankrupt, chapter seven, not eleven.
As for what next. The money Cineworld has will see them through till the big films arrive. At the moment Cineworld have reduced opening hours during the week.
They need to reduce their lease payments. Particularly to those landlords which increased rent by 30%. Also need to negotiate freeze on interest of debts or payment for a year, till cinemas return to pre-Covid levels.
Debt for equity only works if there is enough equity. 4.8 billion into 50 million does not work. IMO