Member Info for WolfofWarks

Antlev - Chapter 11 is a bankruptcy proceeding, it gives the company relief so it can carry on its trading but its role is to facilitate the D4E transaction. This is explained right at the start of the Chapter 11 RNS. So the media are reporting negative news because this is a bad situation.

Hi Ian

All creditors log a claim but it depends how much collateral is on the table as to whether or not they would actively participate in the process. Even then I think voting rights from what I've been reading are distributed by class and then by amount. The judge is making sure there is adequate time for the smaller creditors to be involved in the process should they wish.

So for example if the secured debts are £5bn and the realisable assets are £2bn there is clearly no point in unsecured creditors pursuing a claim as they are unlikely to be paid.

Also the secured creditors who have put up the DIP finance jump to the front of the queue with regards to any distributions. My guess is that it is them who will have the most power when it comes to vote on the re-organisation plan and will ultimately determine if the D4E transaction is approved.

Poor mate - I still don't think you are grasping what a D4E transaction involves. The poor performance of the company hasn't been helped by Covid and poor slate but the underlying problem is it's creaking with debt, meaning the underlying performance you keep referring to cannot be realised. This is also why there are no potential suitors at this stage to buy the company.

The company have not been given money, it's a temporary financing while the chapter 11 and D4E transaction are established - it is not fresh capital it is being lent by the existing lenders and will be taken into account while balancing up the interests in Newco. In fact the lenders want to pull $1bn out straight away to pay off one of the existing tranches of debt which the judge has delayed (not stoped Ian Harding) for a few months.

Once the D4E is agreed the company will either establish a new company or create billions more shares in the existing company. Google 'debt for equity' - there are plenty of examples for you to have a look at and see what happened to the existing shareholders at the time. It is not pretty though.

I feel this has been explained more than enough time so if you think myself and Hexam are both talking waffle and we don't know what we are going on about you need to give your head a wobble :)

I don't want you to lose money, nor anyone, and I'm not implying people should be buying or selling, just arming themselves with the facts and history of D2E so they can proper assess the risks they are taking.

This going well for me so far 14% up already and hopefully a bit of a recovery to come now.

Sorry my last couple of posts have been on the wrong thread! I have got a hangover ....

#54 gives good insight into why only the US and USA have been included in the chapter 11.

Basically to include the ROW entities would have involved cross border complexities which would have made the process too onerous and probably unachievable.

It looks like they have done a separate deal to appease ROW in order of them to be made 'whole' by the DIP facility acquiring all the rights to their debt.

No the aim of the deleveraging is to reduce the debt by swapping some or all of it for equity, which creates the dilution.

Interestingly they are not looking to sell any assets, I guess most of the assets are either properties which they need to be operational or plant, fixtures, fittings, etc, which probably won't be worth much re resale value.

"@ Wolf - could you elaborate on "If the D4E cannot be agreed it's clear that there will be a wipeout."

Why would that be? cuz the loans remain outstanding then and company is forced into default again or?"

Because if the D4E fails the company will fall into insolvency. The current DIP financing is in place to facilitate the D4E transaction:

"Cineworld Commences Chapter 11 Cases with approximately $1.94 billion in Debtor-in-Possession Financing Commitments to Facilitate a Significant De-Leveraging Transaction and Position Company for Long-Term Growth"

Equities interests is your interest in the company, ie your shares and the rights attached to it, voting, dividends, etc.

If the D4E cannot be agreed it's clear that there will be a wipeout. The current DIP lending has been made by those that stand to benefit the most after the transaction has been finalised, ie the major secured lenders of the current existing debt.

Mooky effectively doesn't have complete control of the company while it's in chapter 11, the courts are in charge of all the big decisions. A court appointed trustee has to approve all the big decisions.

This might be why they went for chapter 11 in states rather than administration in UK, in the UK you lose complete control.

Hi Ian - The judge has not blocked the payment of the $1bn, only deferred it, which is why they have been awarded the 20% yield. Think of it as a very expensive short term loan to keep the lights on while the smaller creditors have time to join in the restructure plan.

"RNS reports have only ever warned of significant dilution, and not of a wipeout. I think if there was going to be a wipeout then shares would need to be suspended."

Hi Melonhead - The company have warned via the Chapter 11 original RNS that total wipeout is a possibility:

'As previously announced, it is expected that any de-leveraging transaction will result in very significant dilution of existing equity interests in the Group and there is no guarantee of any recovery for holders of existing equity interests.'

Hi Penta - the D4E hasn't been blocked mate. It's yet to be decided. It is going to happen though otherwise the company will go under as it will collapse under the weight of the debt.

HI Melonhead - simple answer here is that we do not know. All this has to be thrashed out by the company, the courts and the creditors. This is only the first step.

“ They cannot do the debt for equity swap as this is illegal and the judge stopped it.
The lenders wanted to pay back their original loans.
Cannot do this as they have to pay the biggest creditors first.
So I expect them to have to back down and take 20% interest on the current loan of 700 million. Agree to get paid this first. IMO”

Just worth pointing out here that according to the bloomberg article the judge didn’t stop the company paying back the original loan, only deferred it with the intention of the smaller creditors joining in the restructuring discussions/plans. This is what happens in bankrupcies/administrations. You have to register your claim for the money you are owed. How much power that then gives you in any vote will depend on the size of your claim relative to the other creditors.

I would imagine the large secured creditors have all the power here hence them putting forward the DIP finance in the first place.

His imagination :)

Jeff - the key is diversification obviously.

Poor - the fundamentals are terrible here. The core underlying business could make money but I think it will be a value share for income (nothing wrong with that) rather than a growth play.

Poor you are looking at this in the immediate and yes you will make money trading it albeit with the risks that the rug could suddenly be pulled from under you. High risk high reward.

However I don’t trade hardly ever. I Invest over the long term and my belief is that fundamentals (should) always win out.

It’s a difference in philosophy and only time will tell who is right.

Fwiw I hope I am wrong for the long term holders here. I’ve managed to save myself a lot of money by sniffing bad eggs and exiting just in time (SYME, CBX, BOO, ARB this year). Also been caught out by companies I had conviction in for balance (SNG, 888, HE1).

Poor this is perfect for high risk traders like yourself.

Not a good bet for long term investors.

If newco is public then that would be the time to look long term imo.