Member Info for Wellington99

@KickThePuss
Fair point - I was mainly addressing the assertion of one of our prolific panglossian posters that if Cineplex went down then the whole award would disappear, but you are right that an IP would weigh up the risk and return, depending on the advice they received, but one would assume that for them to give up CAN$1.2bn they would have to get several hundreds of millions, unless of course the advice from their counsel is that Barbara got is spectacularly wrong and that they are in a hiding to nothing in the appeal. (Fingers crossed!)

@thehoops
Think you might have your wires crossed there - K2 opened their short just before the court result came out and IIRC that was around the 40p-50p range.

I think HNS_77 did some digging on this and it's something like 4-6 months for the Court to consider whether to allow the appeal and then another 12 months until actually hearing it.
So probably a 2023 date unless it gets expressed as its in the public interest (if there are a slew of other cases out there that look to this as precedent they may do it on the hurry up to give certainty)
Cineworld will want to spin it out for as long as possible so as to get a solid set of financials behind then and delay any payment for as long as possible.
So the sword of Damocles will hang over our heads for quite some time, although if it all goes the right way eventually, this could explode upwards.
People have been speculating that some kind of deal will be done, which is wishful thinking.
Cineworld will maintain that if they are in the wrong then the damamges are a few tens of millions maximum whereas Cineplex have an award of CAN$1.2 billion.
There is no way that the Cineplex Board of Directors would give up 90% of that, even if it might end up being the commercially savvy thing to do as they would be crucified by some of their shareholders, including possible facing personal legal action.
There was also the notion mooted by some posters that if Cineplex went through an insolvency procedure ("went bust") then somehow the debt would evaporate. That is so naive to be risible, and shouldn't be taken into account when assessing the situation. An IP would step into Cineplex's shoes and see the process through, funded either by whatever cash is left or with some new pocket change from creditors - there is zero way that bondholders would give up the chance to be made whole for the sake a few million dollars in legal fees.

Tick, tock.
65 minutes to go!

I agree, but the last Japanese Bull is in the same lonely club as the last Tesla Bear!

@HNS_77
Useful intel, many thanks.
Just goes to show, after wading through dozens of posts of people feedings the derampers/ trolls, there is occasionally something on here worth reading!
Hopefully when Cineworld file their appeal it will be a public document, so we can assess (from a layman's standpoint, nowithstanding that there might be some comment from law firms in the press) the merits of the case.
I also hope that they don't let their pride get in the way and spend too much time trying to overturn the finding that they terminated unlawfully but instead focus on reducing the quantum to something under CAN$50m which should be easier to do and would settle the matter.

Yes. Them or an Insolvency Practitioner if they were appointed.
Theoretically that may make negotiating a smaller sum easier if it was paid sooner, but not by an order of magnitude.

@Hexam
Good point and thanks for the clarification.

I wouldn't place too much store in it - Motley Fool writers are fairly financially illiterate and cherry pick numbers to fit their narrative, which is usually to pump another share listed as click-bait at the bottom of the article.

The Financing line in a set of accounts these days covers a multitude of sins, including in this case:
"The finance expense of $417.2m (2020: $308.4m) predominantly relates to the charge in respect of the unwind of discount on lease liabilities which totaled $219.0m (2020: $164.2m) and the interest on bank loans and overdrafts which totaled $126.6m (2020: $72.9m)."
Those are half year numbers but you can see that the majority of it is a non-cash accounting number. Obviously if cash interest payable was bigger than the EBITDA then there would be a mojor problem, but it isn't for the forthcoming year, and Cineworld should comfortably meet its interest obligations.
Sure, it's got too much debt compared to equity in its capital structure, but it's not existential, in my opinion anyway.

@Lokiloo
The Sunday Sport would be an improvement over the Guardian.
Obviously if you are a blue-haired, bonk-eyed social justice warrior who is obsessed with race, worships at the altar of the NHS and thinks that the answer to everything is smashing capitalism, more government spending and an authoritarian obsession with micro-managing other peoples' lives, then stick with it.
Basically, whenever I see someone reading it I know that they score highly on the Dunning-Kruger effect.

Yup - Jordan888 was just 6 to 60 months too early.

@SriniVaradhanN
I will say this once, and once only.
This board has a rule that is inviolable.
If you have mind bending drugs, and are taking mind bending drugs, YOU HAVE TO SHARE!

@mountainous
Fair enough and each to their own, although I still think that the *need* to be Number 1 is driving some fairly reckless behaviour.
A good example is when the pandemic hit, we found out that the Greindinger Family Trust ("GFT") had to unload a 7.9 percent stake.
The reasons why?
Not only is Cineworld geared to the hilt but so is the GFT - they had to raise cash to meet a margin call and restructure their debt.
https://www.ft.com/content/3045c296-6201-11ea-a6cd-df28cc3c6a68
I love it when management has skin in the game, but Cineworld is being run primarily as a vanity play for the Greidinger family, then for the benefit of its debt holders, then for institutional shareholders with their access to management and finally us poor private investors.
The Greidingers have layered gearing upon gearing, and it's not for the benefit of ordinary shareholders, which is why I would prefer it if there was a change of management and shareholder value was put front and centre.
Very happy to be No 2 with a robust capital structure and regular dividends!
IMHO etc

Greindinger family trust is in effect a poison pill, otherwise Netflix would likely snap it up.
BTW, I personally think that the continuing influence of the Greindinger family and their need to be in control of the largest cinema operator in the world is Cineworld's biggest problem.
The failure to include a proper break clause or MAE in the Cineplex deal shows that they aren't very smart at doing deals.
The deal itself was what caused the share price to tank originally, because instead of using a blend of debt and equity to buy Cineplex or Regal the just borrowed more and more so that the company became over indebted.
That was to prevent them from being diluted down from their dominant shareholding position and maintain personal control.
The fact that the judge in the case thought that they were lying through their teeth has meant that we have a potential CAN$1.2 billion bill to pay.
Impressed I'm not.

Lads, I'd leave this one alone if I were you - there may or may not be some kind of way that the UK assets of Cineworld PLC can be ringfenced from the judgement, but you won't find it here. There will be some arcane legal loophole which fancy priced lawyers will find if there is one.

BTW the Canadian subsidiary was necessary as the acquisition of Cineplex was to be accounted for as a business combination (merger) which would have required another Canadian corporate to have been carried out. However, that was legal structure over economic form and you can bet that Cineplex's lawyers insisted on a parent company guarantee plus many other backstops to ensure that the PLC was in essence the contracting party.

@KickThePuss
The share price isn't the only thing that's been skyrocketing over the last few days - I now have 39 in my filter bin.

This looks like a "Fear of Missing Out" rally to me - good!
It will scale back after the day traders take their profit and we still have a few pence to go to get back to where we were before Barbara decided to demontrate to the world that she was *so brilliant* that she was going to use a method of damages calculation that literally no one had ever used before.
I mean, it must be that she's really smart and every other judge in history that has never seen it that way is dumb, right?

@Stevio
Nice link - *if* we assume that life returns to something approaching normal, and leaving aside the court judgement for a minute, the key question on SP valuation is how much of the future returns will flow to shareholders and how much to debtholders.
Like a rocket blasting off, will trading performance give Cine equity escape velocity, in which case we could easily see valuations in the triple digits or will performance be permanently reduced in which case the SP will fall back to earth requiring a capital restructuring via a rights issue or debt for equity swap.
To my mind, the share price has an element of potential disaster about it, but is mostly down at these levels because the length of time it will take to clear Covid debts and the Cineplex judgement and achieve escape velocity.
A strong trading update/ reduced Court judgement/ positive news on support from lenders would all add momentum to blast off which hopefully will play out over the next three to 12 months.
Great entry price IMHO.

@HNS_77
Great find, thank you.
The consensus appears to be that this is "novel" (in the sense that in Yes Minister Sir Humphrey would call any stupid decision of Jim Hacker "brave") and so likely to be looked at very hard by a Court of Appeal.

Given that if this stands, it would act as precedent for other deals, it wouldn't surprise me if it went all the way to the Supreme Court if not reversed, as the implications are far larger than for a couple of cinema companies squabbling over a broken deal.

Sadly, in the meantime we are in limbo!

@mountainous
If that were to happen, it would usually occur via a deeply discounted Rights Issue to encourage equity holders to protect their relative holding and not get wiped out followed by the cash being used to pay down debt, which has the same net effect.

There isn't really a satisfactory mechanism for doing it any other way, for a bunch of reasons.

The other way is for Cine to trade its way out of trouble and pay down the debt with retained earnings instead of distributing itvia a dividend.