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Cineplex is getting desperate. LPD makes a decent point that with minimal revenue, CP is likely to burn in the region of $24m/month, similar to its cash burn Q2. Last quarterly report shows cash at $28m.

When the closures in the regions they serve end, it isn’t just going to be a case of ‘let’s burst the doors open!’, it will be a gradual reopening most likely (just like it was everywhere else) and the recovery to the level they were at just before these restrictions (which was STILL unprofitable) will take some time to reach, it took us 6 months to reach 90%. With cash in their hands only sufficient for one month of closures, the situation is very tight indeed.

It is in their best interests to avoid a substantial delay in their payout and to take a reduced settlement from CINE, and I think they know it by now. The 20% rise earlier this week shows that something is in the pipeline imo, or at the very least CINE and CPX must be discussing something. Even $300m would massively help CPX, and when you account for legal fees that would accrue from years of the appeal, I don’t think it’s the worst result for CINE either.

CPX get a fat chunk of emergency cash to see them through, CINE gets a massively reduced settlement (and we shareholders would get a very nice sp rise), Mr Mark goes back to his school bus company, Miss Rosenthal goes back to her stash, and Bob’s your uncle.

@BlueBuxton, sorry to hear about your redundancy, I wish you all the best in your search for future employment :)

I wouldn’t be surprised if they did short to be honest. We were informed that the judge would release the verdict to the lawyers after market close on the day, but considering K2 got an early peek (or are psychic lol) I wouldn’t be surprised if Mr Mark and Rosenthal got a sneak peek at it too.

Shame to hear you mostly topped up at 100p+, but I think we will be back up to those levels and beyond very soon. Full year results in about 2 months time, so not long to wait :))

@BlueBuxton, glad to hear you enjoyed it :)

I didn’t end up writing to Mooky haha, I had a think about it and as some people mentioned on this board, it could cause more harm than good if he ended up speaking about the case now. I have trust in him that once he has the path regarding what is going to happen with Cineplex clear, he will convey the info to us as soon as possible.

This week has been quite good for CINE, still a bit surprised we haven’t seen any TR-1 or RNS. Next week awaits us :)

For all we know, Mr Mark or Miss Rosenthal might have bought a few shares ;-)

Good evening @BlueBuxton, agreed that there was some sort of slight of hand going on. K2 and their psychic ability to short just before the judgement came out stinks of corruption.

Please let me know how you found the 355, I’m hoping to watch it tomorrow :)

I would do the same Bonkers, I was thinking about the same thing a few days ago.

If they buy enough to hold a large stake, it could give them leverage for a takeover offer in the future.

Hello @bigtrader, I agree with the fact that the level of borrowing Cineworld has embarked upon is not at all appropriate or proportionate.

However, unless if you are Mooky’s personal accountant, how do you know whether or not Mooky had sufficient funds to take up his rights? Considering the fact that this was pre-COVID, just after the company’s highest ever recorded revenue for a year, it seems unlikely to me that Mooky had insufficient funds to take up his rights if he decided to do a dual funds raise (equity and debt). If he could afford to take up his rights for the Regal acquisition (a significantly higher priced acquisition) then I don’t see how he wouldn’t be able to do the same for the Cineplex acquisition.

@wellington, good evening.

I agree with the first part of your post. The industry knows that Mooky isn’t fond of a buyout.

However, I politely disagree with the remainder of your post. Mooky allowed a rights issue back in 2017 with Regal, so if he was hellbent on continual control then he would have funded the Regal acquisition with only debt.

In terms of the share price tanking from the Cineplex merger announcement, it was discussed on this board a few months ago that it might have been shorters anticipating a rights issue to fund the acquisition, which makes for easy shorting. COVID came in and the shorters have kept their positions.

Lastly, the proper break clause was more due to trust rather than incompetence imo. The evidence during the court proceedings showed without question that Mooky was very passionate about doing the deal (at least pre-COVID), and that him and Ellis Jacob had a very good working relationship. They also removed the clause about ‘acts of God’ and ‘pandemics’ as a way of goodwill (nobody would remove it for the sake of it), something that would have saved us a lot of trouble if they didn’t remove it. The speed at which the work for the Cineplex acquisition was being carried out pre-COVID was very quick indeed, so Mooky and Ellis Jacob had a lot of trust there, it was evident.

All imo.

Good evening @metom, it absolutely could.

I don’t know if you watched the court proceedings, but we found out via the evidence that when COVID was starting to get serious back in 2020, Israel (the deputy CEO) actually suggested taking CINE private. Mooky said that ‘a spit in the face was less insulting’ than that, so it’s evidently clear that Mooky isn’t a big fan of putting CINE in private hands. If he didn’t want to take CINE private into HIS OWN hands, then I see very small chance that he will let someone else take it.

On the other hand, Mooky is about 70 right now, so at some point in the near future he is likely to retire. This would likely mean Israel takes the wheel as CEO. Considering he had no issue with the prospect of taking the company private, I expect CINE would probably receive a few offers. Whether Israel decides to allow the company into private hands depends on how seriously he’ll take the wishes of his older brother. The shares are held in joint control, so how they would vote with their 20% holding, I have no clue at all.

Hello @SriniVaradhanN, indeed there is precedence. In fact, CINE themselves got many covenant waivers during the pandemic.

According to CINE’s base case, we have no need to get a waiver for the covenant tests in June and December this year. The base case stated something like revenue levels reach 90%+ by the end of the year IIRC (which we did ahead of schedule), we will be able to pass the covenant test.

Either way, if we need a waiver I don’t see CINE having any problems doing so. They managed to do it when they were shut and generating no revenue, so doing it now with proof of profitability shouldn’t be a problem.

@HNS, agreed. It’s just an interesting thing to see, nothing more than speculation. I’m sure Cineworld counsel is aware of all possible options.

Like you said, we are not banking on a J&J style slip-out. The appeal is there and considering the use of so-called ‘lost synergies’ by the judge’s calculations (something I think is beyond absurd, everyone here was saying that it was the weakest side of Cineplex’s defence at the time), I still see a way that this settlement can get reduced.

Plus, Cineplex’s current woes put them in a position to choose to get a lower settlement right now and avoid further financing.

If worst comes to worst, we know we have a number of years until the process is exhausted, and by that point I think we will be able to pay the £722m with not much trouble. However, I retain my position that we will not end up paying that kind of money.

@Alexp01 - Cineplex is not in a good situation at the moment. Their major markets are shut in Canada and they aren’t able to sell concessions. Imo, if Cineplex can get even half of court settlement (C$600m) right now then they’d be happy rather than wait years for a $1.2bn that they know they are unlikely to get at the end.

Cineworld has good bargaining power here. For Cineplex, this is their only way to avoid even more external financing, so an out of court lower settlement isn’t as crazy as others may see.

CPX: down 1.06% yesterday
CNK: down 2.50% yesterday
AMC: down a massive 10.75% yesterday
CINE: up close to 20% yesterday and continuing it’s boost into today

Usually CINE is on the losing side of the comparison, but I was honestly fully expecting some small drop today (who wouldn’t after a 20% rise?). I think it’s quite obvious something good is brewing behind the curtain. In the words of some on the Cineplex bb ‘someone knows something’…

Perhaps a TR-1 or some sort of RNS will be published either later today or tomorrow, which should shed a bit of light on the matter. I share the opinion of @ianharding that Mooky and Israel might want to increase their stake back up to 28% again…

Good morning @sharefall.

Yes, that’s correct. Essentially what happened with J&J was when they were found liable for heavy sums of money due to the talc powder, they incorporated a new company called LTL in Texas, moved just their talc powder business to LTL, and then LTL filed for bankruptcy. A bankrupt company cannot pay it’s liabilities, and hence, J&J avoided the sums of money they had to pay.

It’s very interesting stuff…

100% HNS, nice to know there are a lot of options available to us though :)

Hello Bombdog, thanks for your input. I wish to ask you, how did J&J do it? It is effectively the exact same thing that CINE has done here (incorporating a new company and then transferring the liability to them), no?

Considering how 1232743 is stated as the actual purchaser in this transaction, it looks even simpler than incorporating a whole new company right in the heat of the moment just as J&J did?

HNS, to add further, 1232743 BC is actually stated as the PURCHASER in the Arrangement Agreement. So on the surface, it appears as though CINE would be acquiring CP, but it would actually be 1232743 acquiring it. I assume it was then expected that once the acquisition was undertaken, 1232743 would transfer the company to CINE, considering that CINE was in fact the parent company at the time.

FunInvestor, 1232743 was incorporated ahead of time. It was in existence from start of the agreement.

Page 1 of the Arrangement Agreement:

THIS AGREEMENT is made as of December 15, 2019.

1232743 B.C. LTD., a corporation existing under the laws of the Province of British Columbia.

Notice how it says ‘existing’ (present tense), so 1232743 was certainly already set up at the time.

@HNS, I think it’s a definite possibility. CINE creating 1232743 B.C. was an intentional action with thought imo. Why did they create that additional subsidiary? Such a move isn’t needed for an acquisition unless if I’m mistaken.

Personally, I think they created it under legal advice from their lawyers as a fail-safe in case if something like this happened. In my opinion, that is the emergency switch for CINE but they are being very quiet about it. The element of surprise is a very effective thing; if they made the existence of 1232743 more known to others (for example, if they explained it in the RNS on the 15th), then that gives Cineplex lawyers time to circumvent CINE using 1232743 as a way of escape. Just a small conspiracy if you will. I retain my full faith in Mooky, I’m very certain he has an ace up his sleeve and 1232743 might be just that.

Hello Cruis, it is an open secret that Cineworld is going to drag this appeal out for years. Considering the fact that Cineplex is now fully closed within Ontario (67 cinemas shut) and other large markets within Canada PLUS their inability to sell concessions, they need liquidity and they need it now. If I were the CEO of Cineplex and had the option of a POTENTIAL $1.2bn in a few years or $0.6bn (for eg) in a few weeks time (which would avoid the need to seek further external financing), I would have taken the latter in a heartbeat.

Hello Newbie, I don’t have a clue to be honest. If AMC acquire perhaps they’d be a bit lighter with us and make our life easier. Considering all of the equity issuance AMC have done over the past year thanks to their explosive rise I don’t think they need another £722m.

Personally, despite all the trouble they’ve caused, I’m still not exactly opposed to Cineworld acquiring Cineplex. Let’s face it, it was a good deal. Highly synergistic and it would have made Cineworld the largest operator in the world, allowing us to dominate. If COVID didn’t happen, then $34/share was a decent price to pay imo. If Mooky came out tomorrow and made an offer to buy Cineplex but for a slightly lower price (something that I think they are currently considering) then I would not be opposed to it, especially with a potential £722m payout.