RE: Screen Daily article16 Nov 2022 19:53
We know all this, and its balanced piece: Lenders want CINE to continue full speed ahead
Cineworld has enough money to see it through the process. It went into Chapter 11 with $1.94bn of debtor-in-possession (DIP) financing from some of its lenders to help fund its operations and to refinance some of its debt incurred during Covid. This means Cineworld’s lenders have lent it even more money to ensure the company can still operate. It is understood that the DIP facility is the fifth-largest ever agreed in the US, a sign of the determination of Cineworld’s lenders to support the business.
Companies that file for Chapter 11 also benefit from an ‘automatic stay’, which keeps aggressive creditors at bay and prevents them calling in loans or repossessing property. This allows Cineworld to prioritise paying key suppliers, vendors and staff.
Continuing with day-to-day business as normal is very much in the interests of both Cineworld and its lenders. “They want to make sure they do not hurt the business,” says one debt restructuring expert. “Key for creditors is to make sure they don’t kill the goose, whether it lays golden or silver eggs.”
The expert adds: “You are trying to say to staff and trade creditors, ‘Don’t worry, this is just a financial problem — we’ll continue to pay you.’” Thanks to Cineworld’s DIP facility, the company has immediate access to funds.
In the medium to long term, the company’s creditors will be hoping admissions improve, boosting its income and balance sheet. At this point, Cineworld’s lenders will start to look for an exit plan — likely within three to five years.
Future leadership
There are now question marks over the future of the Greidingers at Cineworld. The Chapter 11 process typically takes nine months to resolve. At that point, will Cineworld’s lenders – who will own the business – want Mooky to continue at the helm? That depends on whether he is perceived by creditors as the best man to run the business and to maximise the creditors’ recoveries.
Mooky has been criticised for loading the company up with debt and leading the company into bankruptcy proceedings. “In fairness to Mooky, yes he went on an acquisition spree before Covid and built a cinema empire with lots of borrowed money,” says the restructuring source. “But people were very happy to lend him the money to do that. And I don’t think we can blame him for what happened with Covid.”
Some think it is likely Mooky – who is known to live and breathe the cinema business - will be given a stake in the restructured company.
Others have speculated Cineworld may be sold as it emerges from Chapter 11. But a buyer would either need a big cheque book or would have to borrow a lot of money – at a time when interest rates are high.
In the meantime, there are some likely winners from the restructuring. Chapter 11 is a notoriously expensive process, and is likely to cost Cineworld tens of millions of dollars – much of which will go on lawyers.
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