Member Info for WolfofWarks

Conclusion


The Directors are encouraged by the reopening of the business and the demand for cinema-going shown by customers in recent months. Recent steps in securing additional liquidity and relaxing restrictions on the business are also believed to represent significant progress towards a return to previous levels of stability. Having considered all known factors the Directors

are comfortable that the weighted base case supports the going concern assumption. However, the Directors recognise the challenges facing the business and some uncertainty around the recovery of the cinema industry following the impact of COVID-19, and the potential risks that remain, which represent material uncertainties that may cast significant doubt upon
the Group’s ability to continue to operate as a going concern. Given the sensitivity to admission levels, and any changes in the current schedule of film releases, material uncertainties exist in respect of the ability to repay the RCF sufficiently by the end of June 2022 to avoid the net leverage covenant, and the ability to repay and refinance the RCF in February 2023.

Further there is a material uncertainty as to whether Cineworld is able to successfully appeal the Cineplex judgment against it, as sufficient liquidity does not exist to be able to pay the damages awarded.

In addition, the potential covenant breaches in the severe but plausible scenario along with the inability to repay the RCF in February 2023, indicate the existence of a material uncertainty that may cast significant doubt upon the Group’s ability to continue to operate as a Going Concern. The consolidated financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

Severe but Plausible Downside Scenario

Given the current uncertainty around the speed of recovery from the effects of COVID-19 in the forthcoming period and the challenges around forecasting the impact on the cinema industry, the Directors have considered the following severe but plausible downside scenarios to stress test the Group’s financial forecasts.


1. A lack of film content for two months in 2022, driven by changes to the film slate and uncertainty caused by a resurgence
of COVID-19, with a gradual return to admission levels modelled under the weighted base case. Under this scenario the Group would achieve 50% of the admission levels modelled under the base case for two months, this represents admissions at 43% of

2019 levels during April and May of 2022. Then, averaging 70% of 2019 levels from July through to December 2022, admissions gradually return to the admissions levels modelled under the base case in January 2023 and beyond. No further lock down or additional operational restrictions are considered. Under this scenario the Group would breach its net leverage covenant in June 2022, it would also breach its minimum liquidity covenant in September 2022, and would not have sufficient liquidity to repay the RCF in February 2023. Sufficient liquidity to continue operating would remain up to the point at which the RCF matures.

The above uncertainties in respect of Cineplex, the weighted base case, and the severe but plausible are also applicable to the company, as it has no ability to repay its borrowings without sufficient distributions being received from the group subsidiary entities.

Base Case Scenario

The Group’s base case scenario assumes a continued recovery to pre-pandemic levels of admissions, with cinemas across all territories remaining open. In the US, admissions are forecast to return to levels representing 85% of comparable periods in 2019 during 2022, with corresponding levels for the UK and ROW at 90% and 95% respectively. Admissions are then forecast to remain on average 5% below 2019 levels throughout 2023 and to recover to 2019 levels in 2024. In addition to cinema performance, the Group’s cash flows and liquidity are sensitive to the timing and level of rent payments. The Group has been successful in agreeing further waiver and deferral of significant rent payable on a number of lease agreements with the
support of landlords. Rent payments have been modelled in line with actual modifications and the expectations of achievable deferrals over the coming 15-month period based on on-going discussions with the landlords. The Group has also taken into consideration mitigating actions available to it, these include stopping all non-essential capital expenditure for the coming six months which has been modelled under the weighted base case scenario. In addition, the Group has taken steps to reduce operational and administrative costs, in order to further preserve liquidity. Further steps would be taken to operate at a minimal costs basis should the Directors consider it necessary. No further lockdowns or operating restrictions in 2022 are considered within this forecast.

Under the weighted base case scenario, the Group maintains headroom against available cash and debt facilities throughout the going concern assessment period. Financial covenants on the RCF would not be breached as the Group would have sufficient funds to pay down the facility such that the covenant is not applicable. It is noted however, that the ability to do this is sensitive to admission levels not being hit, any further film delays and any a material rent payment that has not been modelled. As such, there is considered to be a material uncertainty as to whether the Group will be able to pay down the RCF as at the June 2022 covenant testing date. In the event that it is not able to a covenant waiver for June 2022 would be required.

The minimum liquidity covenant would not be breached and the Group would achieve 80% of 2019 admission levels for a 3-month comparable period in August 2022. Sufficient liquidity would exist to repay the RCF when it matures in February 2023, however, to support working capital requirements of the Group, it would need to be refinanced.

Considering the liquidity implications of the scenario analysis and the uncertainty, the Board are assessing several options with regard to additional sources of liquidity including the increase of the RoWPP

Dissenting Shareholders


On 10 September 2021, the Group announced that it had reached agreement with the dissenting shareholders of Regal Entertainment Group (the “Regal Litigation Parties”) with respect to the payment of judgment of their claim. Under this agreement, the Company paid $170 million of the Judgment to the dissenting shareholders and $92 million was placed into

an escrow account to be available to Cineworld as additional liquidity under certain circumstances.

On 1 February 2022, Cineworld announced that it had initiated discussions with the Regal Litigation Parties in relation to a potential rescheduling of the Group’s payment obligations under the unsecured facility agreement relating to the settlement reached with them in September 2021 (the “Unsecured Facility Agreement”). It was agreed that the remaining $79.3 million (plus interest and fees) owed under the facility would be paid to the Regal Litigation Parties in instalments with a final payment due on 30 June 2022, rather than the previously agreed date of 31 March 2022.

Cineplex

On 6 July 2020 the Group confirmed that Cineplex had initiated proceedings against it in relation to its termination on 12 June 2020 of the Arrangement Agreement relating to its proposed acquisition of Cineplex (the “Acquisition”). The proceedings alleged that the Group breached its obligations under the Arrangement Agreement and/or duty of good faith and claimed damages of up to C$2.18 billion less the value of Cineplex shares retained by Cineplex shareholders.

The Group defended these proceedings on the basis that it had terminated the Arrangement Agreement because Cineplex breached a number of its covenants and counter-claimed against Cineplex for damages and losses suffered as a result of these breaches and the Acquisition not proceeding, including the Group’s financing costs, advisory fees and other costs.

The Ontario Superior Court of Justice has now handed down its judgment. It granted Cineplex’s claim, dismissed the Group’s counter-claim and awarded Cineplex damages of C$1.23 billion for lost synergies to Cineplex and C$5.5 million for lost transaction costs. The Group disagrees with this judgment and has appealed the decision. The Group does not expect damages to be payable whilst any appeal is ongoing, which is likely to take longer than the assessment out to 30 June 2023. No liability has been recognised in respect of the judgement on the basis that payment is not considered probable at this stage, and

the directors have not factored any payment of damages within their assessment of whether it is appropriate to adopt the going concern basis for the Group as at 31 December 2021. It is the view of the Directors that the appeal process is unlikely to conclude within the going concern assessment period.

There is a material uncertainty around the Group’s ability to successfully appeal the judgment and avoid the damages payment. Cineworld believes it has comp

Going concern


In assessing the appropriateness of applying the going concern basis in the preparation of the consolidated financial statements the Directors have considered the Group’s liquidity and forecast cash flows under a range of potential scenarios taking into account reasonably possible outcomes over a 15-month period from the date of approval of these financial statements.

Given the global economic uncertainty driven by COVID-19 and its specific impact on the exhibition industry, the Directors consider some volatility in performance and a certain amount of disruption to business likely over the coming 12 months.

The scenarios modelled consider the speed of recovery from the impact of COVID-19 and its effect on the cinema exhibition industry, consumer behaviour, the availability and timing of film content, impact on contractual cash flows specific to the Group and its liquidity position as well as future access to liquidity. These scenarios cover a range of potential outcomes primarily based on the strength and speed of the recovery from the COVID-19 outbreak and the return to pre-pandemic levels of activity, as well as the potential for further impact in the future. Each of the scenarios are sensitive to forecast admission levels over the coming 12-month period. In assessing the going concern basis the Directors have assumed the industry will return to levels of performance similar to those observed prior to the COVID-19 impact by the end of 2023, with continued gradual build up to those levels over a period of time.

Restrictions required by law across operating territories have reduced significantly since reopening and currently do not impact the Group’s ability to operate at levels observed prior to the pandemic. The Group has implemented additional safety measures and operational changes where considered appropriate to ensure the safety of customers and employees.

The minimum liquidity covenant (which will not apply if the Group reaches 80% of admission levels for a 3-month comparable period in 2019), net leverage covenant on the revolving credit facility (RCF) and the net leverage covenant on the Rest of the World private placement loan (RoWPP) are the only remaining financial covenants with which the Group is required to comply. The Group is only required to comply with the RCF net leverage covenant when the facility is drawn down by greater than 35%. The Directors are confident that the Group can continue to operate and recover fully from the impact of the pandemic whilst complying with all obligations under its lending agreements.

In addition, the RCF has a maturity of February 2023, at which point the group will either repay or refinance the facility.

The Group’s currently available facilities and indebtedness are set out in note 19.

'my point about misleading is they gave glowing words in annual reports about how fantastic they were … that’s why corporate reporting and here the auditors role is up to s..hit.

find a report that gives anything other than “we are fantastic” .. don’t exist, that’s where the misleading comes in, same as in the financial crisis or recent svb bank … such reports don’t exist

need jeff bezos money to fix this …'

they didn't though elvis. in the 2022 annual report they went to great lengths to tell you how in the sh it they were. the going concern statement was pages. you just didn't want to believe any of it, which is your own fault and nobody else's if you were to be completely honest with yourself.

we've discussed it before and you reckoned it was **** covering.

'we are f..poked mr k .. essentially the latest law fees docket says this was all being carefully rehe****d and agreed in a fca submission back in may.

daily trading volume is now 9m shares or £90k, they probably consider this an invalid market now and starting to breach listing regulations'

Have you bought back in Elvis?

'Wolfie... Sorry. I am old school. Need to take you to task here:

1. CINE provided one set of valuation number.

2. A proffesional valuation company was hired and presented thier numbers.

3. If a 3rd part company was hired and thier numbers do not align with CINE's.

***Yes sir.. a case should be made of fraudulent efforts against shareholders..

Wake up wolfie! We dont trust the CINE numbers.... if the deal they made was this bad... who knows how they played with the numbers!!!'

An investment bank was brought in to value the company because they are experts in valuing companies. I was laughed at in the autumn when I said that the lenders were in control here ....

Mr Kioto - You're basically questioning the judge's competancy because he's watched all this go through. Unless you believe he is part of the conspiracy?

'Bloody hell wolfie !

Ch 7 .. should proceed and everyone loses!.... or... just maybe... the new Co owners can pay a small gester payment to satisfy shareholders (pennies on the pound), and we all move on?????

Elvis & Wolfie... do you concur?'

a) they dont need to

b) why would they want to?

c) the bankruptcy code doesn't allow for any distribution to shareholders until all over creditors have been made whole.

Mr Kioto - the judge has supervised this whole process from the off. The valuation was carried out by a third party, not by Cineworld. The company has employed the services of the best corporate lawyers in the land.

Elvis - of course the company planned for C11 two years ago - they were hanging by a thread which is why the lenders have so much power now. The legacy loan covenants and security gave them absolute control in the event of a default because .... there was a high chance of it happening and here we are.

All corporate lending is underpinned by security and subordination.

Sue for fraud .... I've heard it all now. The simple facts here are that the company ran out of cash, went into c11, tried to unsuccessfully sell the company and now the lenders are stuck with it. A legal process decides who get's what based on the security which the lenders had.

There is no fraud just a legal process being played out and unfortunately holders get left holding the baby.

What you've got to remember is that the lenders have lost out here too and the judge's job is to make sure they are put right before the unsecured creditors and lastly holders.

So patience might be able to put an alternative valuation on the table - it would have to be realistic though and actually prepared by an expert who is prepared to advocate. To what aim though with no willing buyers.

The lenders can simply pull the plug and let this go to a C7 and pick it up that way as they will still be first in the queue.

If that article is correct it sounds like Mooky and co are not even in the running for Newco. That to me makes more sense - why risk history repeating itself.

Elvis - what are you expecting me to say? I've only been on here since late August.

That sounds like they won't even retain the Plc as a Shell.

'Using same logic, my wallet containing £5 + Amigo loan for £1m = i have 'cash in bank' of £1m + £5. Total rubbish.

I have £5 and a whole heap of credit portraying itself as 'cash in bank' when in reality its simply a credit line, or debt/working capital/rope around my neck/liability, depending on how you spin it.

Default on your mortgage for the last tenner, and see who 'owns' your house. It wont be you.

"So they have plenty of liquidity and do not need a placing, which was the theme from the start of the thread."

Again, I have never mentioned placing, although they do have plenty of liquidity, most of the cash osnt actually theirs, its the banks.

DTN - we'll go round in circles arguing what is essentially the same point albeit from different angles. Most business have debt. It doesn't mean they need a placing if it is non-utilised.

Do you not have a home if your mortgage is still outstanding?

I'll finish with cash in the bank is cash in the bank. The line on the accounts even states 'Cash at bank and cash equivalents' :)

I think this has got serious legs now up to earnings

'If you were buying a business, then the only thing you'd want to see is profits from sales and rising profits from sales because this means it's a growth business. The rest is peripheral.'

That's a highly simplistic view.

Who would have thunk it?

Jesus Okehurst mate - you are making this very hard work. They are working with the NOMAD on outstanding issues in order to re-list - it's in black and white in the accounts.

I have never know going concern to ever be a factor in bringing back a suspended stock. You are going to have to show me where in the handbook this in the case.

Like Hexam said lots of companies have issues in relation to going concern. it's par for the course on AIM.

'Today 17:49

Okehurst1 - you are too fixated on cash and not on profits from sales. Look at where the cash came from and it didn't come from profits on sales. It came from lowering the stock inventory and a bit elsewhere. This isn't profits from sales. This isn't a growing business. This is a business surviving at present.

Please don't reply to my posts because I don't want to go on and on with this.

If you can't see this for yourself, that's down to you.'

PeePee - the stock movement doesn't form part of Ebitda.

'You'll never learn, will you? It's the Company's job to sell the business to analysts.

An analyst call from nearly a month ago. You are scraping the barrel.

None of Boohoo's brands are making a profit from sales.

You can come up with all the figures you want to try and convince yourself.

The high volume, share price going down should tell you otherwise.

Please don't reply to my posts because you waste my time and energy.'

Listen you imbecile - you have no idea how to read a set of accounts as you consistently prove. How is the analysts call irrelevant when it sets out its future plans? What has happened in one month that has changed that course? The SP is not the fundamentals of the business.

You waste your own time and energy by typing the same five points over and over again every day ad nauseam. You can never reply with any intelligence. You throw a bomb in and then try to walk out of the room (REVB CEO being a case in point).

You are a raving simpleton and thick as mince to boot.

Okehurst - this next twelve months accounts will be tough. There will be lots of exceptions and duplicated costs relating to the USA distribution rollout. The NDC will be drip fed with new lines which the rest on the USA customers being fulfilled from Sheffield. However sales should increase and the new brands should become more effective. I'm looking for a change in the underlying business but do not expect statutory profitability.

I wouldn't ask PeePee anything - he didn't know that sales and revenue were the same thing the other week.