Member Info for RS2002

*re-opening Wales and Scotland this Friday

“...unless a waiver agreement is reached with the required majority of lenders within the going concern period.”

It is widely understood that Cineworld, citing such a risk concern mitigated it before it became material.

22 June 2020: Cineworld is pleased to announce that the Group has agreed with a group of private institutional investors the terms of a new $250m secured debt facility with a maturity of 2023. This, TOGETHER with the COVENANT AMENDMENTS and revolving credit facility increase of $110m announced on 28 May 2020, further strengthens the Group's balance sheet as cinemas begin to re-open around the world.

Source: https://otp.tools.investis.com/clients/uk/cineworldplc1/rns/regulatory-story.aspx?cid=655&newsid=1397845

No one has a crystal ball, however the de-ramps and flooding of the board with imminent failure are simply noise with no basis.

Cineworld:

1. Don’t need more loans or a cash injection as they have sufficient liquidity to keep them afloat until July 2021 in the event ALL of their cinemas remained closed indefinitely until then. Given they have reopen ALL European cinemas and are opening England cinemas this Friday, that is unlikely.

2. Don’t need to do a rights issue to dilute shareholders shares.

3. Have negotiated lease cuts and in some instances like Poland when they were shut DIDN’T pay a penny in rent.

4. Have European cinemas that play domestic movies not linked to Hollywood/American; this means they have UNLIMITED membership paid and domestic box office sales that don’t care one iota about Hollywood titles.

5. Have variable costs to the tune of 70% and a flexible manpower model, read: zero contract hours with temporary staff. Not popular, I know, but from a spend perspective is great for shareholders.

The angle they are going bust doesn’t fly.

Fitch the rating agency even testified to that stating, the issue of a USD250 million secured debt facility and a USD110 million increase in its revolving credit facility (RCF) have ALLEVIATED short-term cash risks

Pre Covid, free cash flow was well over $1bn a year, interest on bank loans was under $200M. Net debt was being reduced and around $500M a year was being paid out in dividends.
Even with reduced capacity CINE will easily be able to cover the interest payments just from 100% openings in UK and ROW and a fraction of the US market. Fair enough there is not enough going around for a dividend but no one is buying in for that. There is no issue of CINE defaulting on debt short term unless they remain closed until well into 2021 which is not going to happen.

*2021

@Indepthwins, it’s refreshing to see you ACKNOWLEDGE the POSITIVE LIQUIDITY position Cineworld posses that will see them comfortably through a challenging 2020.

Given the positive advancements in vaccine programmes, that won’t just benefit leisure but global industries, the outcomes for 2020 in my opinion remain optimistic.

The current SP presents a substantial discount to the pre-covid19 era and I and many investors have taken positions to see this recover well.

I particular appreciate the proactive stance, Cineworld took before lockdowns were imposed. They had a clear strategy and we should expect to see the H1 results demonstrate the cost reductions to further strengthen the EBITDA figures.

“... We are taking measures to ensure that we are prepared for all possible eventualities. Should conditions relating to COVID-19 continue or worsen, we have measures at our disposal to reduce the impact on our business including, but not limited to, capex postponement, cost reduction, in order to maintain cash liquidity...”

Source: https://otp.tools.investis.com/clients/uk/cineworldplc1/rns/regulatory-story.aspx?cid=655&newsid=1378287

So I was thinking a little more about the POSITIVE news that the Cineworld BoD retrieved for the company and it’s investors. That the ND/EBITDA ratio covenant test was increased from 5.5x to 9.0x.

We know that in 2019, Cineworld scored a very good EBITDA of $1033m which resulted in a ND/EBITDA of just 3.4x ($3500m/$1033m). This kept lenders very satisfied that Cineworld were comfortably within revenue making headroom to clear the much more generous 5.5x ratio they imposed, which would have seen EBITDA needing to come in at a minimum of $636m. So to put that into perspective, Cineworld scored 62% higher in the test and easily passed to keep the lenders happy that Cineworld would be good to honour their debts.

Given the lenders have now provided a much more GENEROUS ND/EBITDA of 9.0x, to put that into perspective, Cineworld, at a minimum, to satisfy their net debt of $3500m, need a EBITDA of JUST $388m.

What is that as a percentage comparable to 2019? 37% ($1033m/$388m). Cineworld can pass their covenant test on the basis they can demonstrate profit earnings, EBITDA of just 37% of 2019.

As for 2020, the lenders have set the next test in June/ July 2021 and the ND/EBITDA at 5.5x.

My opinion is that Cineworld will comfortably clear the test for 2019, given Jan/Feb were unaffected months and they are on course to re-open their largest territory, the US (73% of their estate) in less than 2 weeks. This will generate more than sufficient revenue and see the test score is met.

With regards to 2021, given the next test date is July, there is enough time to

1. Monitor income streams including those that are passive such as UNLIMITED memberships.
2. Assess the movie slate for 2021 to ensure a sufficient catalogue exists to entice footfall.
3. Assess the market for a vaccine
4. Establish if a second wave is to come about or just a few local flares which regional lockdowns address
5. Assess income and re-negotiate with lenders in a manner akin to AMC, should it be required.

In short, Cineworld is NOT facing imminent collapse and need to undertake a rights issue, as some commentators would like you to believe. Their loan maturity is not until 2023 and their market cap is very much removed given their current share price doesn’t reflect their true Net Asset Value (NAV).

Good luck and DYOR.

The US cases are dropping which, for Cineworld investors is great news.

73% of Cineworld’s cinema estate is in the US.

80% of US states Cineworld operate in PERMIT the re-opening of movie theatres.

UNLIMITED membership activated and Cineworld can expect substantial passive income, on top of selling movie theatre tickets.

The current SP has been tested and keeps bouncing to 35p+.

For this seeking the bottom, this is it.

The Net Debt (ND) to Earnings Before Interest Depreciation and Amortisation (EBITDA) ratio is a debt ratio that shows how many years it would take for a company to pay back its debt.

Lenders will often undertake covenant tests, usually after each financial year to test the company on their earnings and ability to honour their loans and debts.

Pre-Coronavirus, Cineworld’s Net Debt being $3.5 Billion had a 3.4 ND/EBITDA ratio. Which was very low (under 5 is considered good) and was used to support covenant testing by lenders to install confidence that they were in a good place to pay back their debt.

Source (Financials at a Glance, Slide 4): https://www.cineworldplc.com/sites/cineworld-plc/files/2020-03/2019-full-year-presentation_0.PDF

It’s no secret that Coronavirus has impacted footfall and we have seen Q2 have zero income.

What investors need to be aware of is that Cineworld have negotiated some changes to their ND/EBITDA ratio to give them more breathing space to get through the current pandemic and reduced footfall.
Cineworld have had their ND/EBITDA ratio increased to 9.0 to support the testing covenant due 31 December 2020. This means when the lenders crunch the numbers, they will account for REDUCED income and a higher debt ratio. This is favourable as one cannot expect a company in leisure like Cineworld to perform at levels pre-Coronavirus until we see a vaccine in place and footfall back to its pre levels.

Now imagine my surprise when another commentator on this BB suggested this was negative news.

Be careful who you follow on this BB as they will happily take positive news, spin it to imply a negative connotation to manipulate investor sentiment for their own personal (short position) gain.

Agree @ TradingPace.

It’s a pretty desperate deramp when ALL indoor activities mandate a mask not just cinemas.

Poor fellow wants a lower entry. Onwards and upwards for Monday.

The sentiment has turned and confidence following tree shakes is being predictable and investors are buying on dips or holding tight.

1. Cineworld have made it clear on their website and adhere to guidelines.
Wearing a mask is required except when you’re seated and if you have to eat popcorn or have a drink.

2. Wearing a mask reinforces the directive from the government and mitigates the risk of governments taking a u turn on the reopen of cinemas. We have seen what happen with casinos and some leisure activities. Cinemas are great in that they respect social distance by way of staggered static seating, have screenings cleaning after each viewing and avoid frequent touch points like casino chips for example.

From Cineworld’s website:

Source: https://www.cineworld.co.uk/static/en/uk/blog/cineworld-cinemas-reopening-FAQ-frequently-asked-questions-coronavirus-covid-19

Least we forget that schools re open next month. No social distance, no masks, frequent touch points and millions in large classrooms.

We should be thankful cinemas are operating this policy as an interim measure while we await the approve news of a vaccine around the corner.

Government rules permit face coverings can be removed to consume food and drink.
The notion behind face masks is when you enter, access shared walk ways and in the lobby. When you sit down with your food you can remove.
Source: https://www.cineworld.co.uk/static/en/uk/blog/cineworld-cinemas-reopening-FAQ-frequently-asked-questions-coronavirus-covid-19

Good article on Troll2 and the debate if it will ever break-even.

"Despite NBCU's boast that the Trolls sequel has scored almost $100 million domestically from the on-demand release, the movie is still millions in the RED and, in the opinion of some industry veterans, may NEVER make a dime. "

Stars, Timberlake and Kendrick were NOT happy and it puts into question the viability of movies with big stars if they skip theatrical release.

Source: https://www.hollywoodreporter.com/news/trolls-world-tour-stars-want-pay-but-will-studio-make-any-money-1293394

The point I raise is the Fitch score associated with the DEBT, which has a maturity of 2023, is something corporate investors need to concern themselves with not private investors.

The BoD have already mitigated the immediete liquidity position citing that they have sufficent funds to keep all of their cinemas closed through the entire year. We know that this isn't required as most territories are open, with the exception of the US, granted they make-up 73% of their estate. This remains on track for 21 August so 2 weeks away.

If I was to humour your post about debt securities, again something that isn't relevant as PIs are not trading it, the default risk of Grade B debt (which Rolls Royce has as well) is 4-6%.

Let's try to stay on-topic, shall we?

Cineworld’s probability of bankruptcy is based on Altman Z-Score and Piotroski F-Score is 7%.
Source: https://www.macroaxis.com/invest/ratio/CINE.L/Probability-Of-Bankruptcy

The risk of default of B grade DEBT = 4-10%

- Negative outlook ~10%
- Positive outlook ~90%

Whilst the grade of their DEBT is B, unless you’re a capital fund which has a desire to trade DEBT SECURITY which is a type of financial asset that is created when one party lends money to another. For example, corporate bonds issued by corporations and sold to investors. CORPORATE bond investors lend money to corporations in return for a pre-established number of interest payments along with the return of their principal upon the bond's maturity date.

Cineworld’s maturity for its DEBT is 2023, but keep in mind when purchasing stock, you are trading EQUITIES SECURITY.

Thus to bring up their score and options on DEBT trading is a MOOT POINT.

In short, unless you’re trading debt securities, the B grade is not relative to the performance of the company merely demonstrates the 4-6% risk of default for those who are doing debt securities trading such as institutions.

Cineworld share investors are buying into is a EQUITY SECURITY and are assessing the value of the stock on its ability to operate and perform post coronavirus.

Try harder, Tidd.

I would say keep your portifolio diversified.
If I was a ramper, I'd say sell everything and buy into CINE alone.
Don't do that - BOO looks good and is showing signs of a positive recovery.

Good article posted about Mulan and why it went PVoD. No suprise given the political tensions between US and China.
Source: https://www.cnbc.com/2020/08/06/mulan-went-to-disney-out-of-necessity-wont-become-the-norm.html

A very fake account, worse he has hijacked a Celtic/Gaelic name.

Correct - 80% of US Regal/Cineworld cinemas are PERMITTED to OPEN by state officals.

That is a big fundamental.

Shorts know their time is close - hence the push to drive the price down.

Don't sell and give in - hold and top-up on the dips.

The UK numbers are fantasic.

We have done a great job controlling this spread by introducing regional lock-downs.

National lock-downs are a thing of the past now.

This means, Cineworld can scale operational costs accordingly.

1. Notify their agency to stand-down temporary zero hour contract staff
2. Switch off the lights and shut up movie complex
3. Re-direct staff to another area which is open

This level of scale is attractive.

Least we forget the UNLIMITED revenue that comes in regardless to which cinema is closed vs open when regional lockdowns take place?

Greed is good to an extend but fundamentals hold merit and the volatility of this share can go BOTH ways.

Correct, counter suing - that alone tells you they have legal recourse to do so.

If I was a desperate ramper I could argue they are in for a windfall of BILLIONS from Cineplex. I won't however.

I'll report the fundamentals.