3 Apr 2023 07:00
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION (DIRECTLY OR INDIRECTLY) IN WHOLE OR IN PART IN, INTO OR FROM THE UNITED STATES OF AMERICA OR ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION
CINEWORLD GROUP PLC ("Cineworld" or the "Company")
Chapter 11 Update
Cineworld Announces Conditional Agreement With Lenders To Emerge From Chapter 11 With Strong Financial Platform To Deliver Long-Term Strategy
Cineworld (together with its subsidiaries, the "Group") today announces that it and certain of its subsidiaries (together, the "Group Chapter 11 Companies") have entered into a restructuring support agreement (the "RSA") and a backstop commitment agreement (the "BCA") with lenders holding and controlling approximately 83% of the Group's term loans due 2025 and 2026 and revolving credit facility due 2023 (together, the "Legacy Facilities").
The lenders party to the RSA and the BCA have agreed, subject to the execution of definitive documentation and certain other conditions as described below, to support a proposed restructuring of the Group Chapter 11 Companies (the "Proposed Restructuring"), including a commitment to: (i) provide a first lien exit financing facility; and (ii) backstop an equity rights offering in connection with the Proposed Restructuring. The intention is for the Proposed Restructuring to be implemented primarily through a plan of reorganisation (the "Plan") in the Chapter 11 cases of the Group Chapter 11 Companies (the "Chapter 11 Cases").
Consistent with the Company's announcement on 24 February 2023, in light of the level of existing debt that is expected to be released under the Plan, the Proposed Restructuring does not provide for any recovery for holders of Cineworld's existing equity interests.
Mooky Greidinger, Chief Executive Officer of Cineworld, said: "This agreement with our lenders represents a 'vote-of-confidence' in our business and significantly advances Cineworld towards achieving its long-term strategy in a changing entertainment environment. With a growing slate of blockbusters and audiences returning to cinemas in increasing numbers, Cineworld is poised to continue offering moviegoers the most immersive cinema experiences and maintain its position as the 'Best Place to Watch a Movie'."
Proposed Restructuring
If implemented, the Proposed Restructuring is expected to:
· reduce the Group Chapter 11 Companies' funded indebtedness by approximately $4.53 billion, principally through lenders under the Legacy Facilities (the "Legacy Lenders") receiving equity in the reorganised Group in exchange for the release of their claims under the Legacy Facilities;
· raise $800 million in aggregate gross proceeds, through a fully backstopped equity offering to the Legacy Lenders (the "Backstopped Rights Offering") and a direct equity offering to certain Legacy Lenders (the "Direct Allocation Offering" and, together with the Backstopped Rights Offering, the "Rights Offering"); and
· provide $1.46 billion (net of original issue discount) in new debt financing (the "Exit Facility") to the Group Chapter 11 Companies upon their emergence from the Chapter 11 Cases.
The proceeds of the Rights Offering and the Exit Facility will be used to, among other things: (i) repay in full the approximately $1.94 billion debtor-in-possession financing facility entered into by the Group Chapter 11 Companies when they commenced their Chapter 11 Cases; (ii) fund the costs associated with the Group Chapter 11 Companies' emergence from the Chapter 11 Cases; and (iii) fund their go-forward business operations.
The Proposed Restructuring does not provide any recovery for holders of Cineworld's existing equity interests.
Completion of the Proposed Restructuring is subject to a number of conditions as set out in the RSA and the BCA (the "Conditions"), including, among other things: (i) approval of the Plan by the requisite thresholds of the Group Chapter 11 Companies' creditors (being, in broad terms, at least one half of the Legacy Lenders and those holding two thirds of the claims outstanding under the Legacy Facilities); (ii) confirmation of the Plan by the United States Bankruptcy Court for the Southern District of Texas (the "Bankruptcy Court"); (iii) execution of ancillary implementation proceedings; (iv) entry into, and filing of, the definitive documents required to implement the Proposed Restructuring; and (v) the Group's entry into a revolving credit facility of up to $200 million (which is subject to certain approval rights of the Legacy Lenders that have signed the RSA (the "RSA Parties") and the Equity Capital Raising Parties (as defined below)). The RSA Parties have committed, subject to the terms of the RSA, to vote in favour of the Plan and support the Proposed Restructuring.
A summary of the key terms of the Rights Offering and the Exit Facility, as well as the expected treatment of certain stakeholders under the Proposed Restructuring, is provided below and is not exhaustive of all the terms of the RSA and BCA. Further detail will be provided in the Plan and an accompanying disclosure statement (the "Disclosure Statement"), both of which will be consistent in all material respects with the RSA and the BCA and filed in due course with the Bankruptcy Court.
Rights Offering
Through the Backstopped Rights Offering, the Legacy Lenders are expected to be offered, pro rata to their holdings under the Legacy Facilities (and subject to meeting certain eligibility criteria), the right to purchase shares in the reorganised Group in an aggregate purchase amount of $400 million. The Backstopped Rights Offering will, subject to the Conditions, be fully backstopped by certain Legacy Lenders (the "Equity Capital Raising Parties").
In connection with backstopping the Rights Offering, the Equity Capital Raising Parties will: (i) agree, subject to the Conditions, to purchase shares in the reorganised Group in an aggregate purchase amount of $400 million through the Direct Allocation Offering; and (ii) be paid a backstop fee equal to 20% of the issued share capital in the reorganised Group after giving effect to the Proposed Restructuring, including the Rights Offering (the "Equity Backstop Fee").
Under the terms of the BCA, the price payable to subscribe for shares under the Rights Offering will be set at a 25% discount to an implied equity value of the Group after giving effect to the Proposed Restructuring of $1.48 billion. The BCA does not provide for the holders of Cineworld's existing equity interests and other securities to participate in the Rights Offering unless those holders are also Legacy Lenders and, as outlined above, the Proposed Restructuring does not provide for any recovery for holders of Cineworld's existing equity interests.
Exit Facility
A sub-set of the Legacy Lenders (the "Exit Facility Commitment Parties") will commit, subject to the Conditions, to provide the Group with a new first lien facility of $1.46 billion (net of any original issue discount).
Under the terms of the BCA, the Group will be required to run a third-party marketing process to raise a facility of equivalent size on alternative terms (subject to certain approval rights of the RSA Parties and the Equity Capital Raising Parties), with the Exit Facility being provided, subject to the Conditions, by the Exit Facility Commitment Parties if it is not possible to obtain such a facility. In connection with backstopping the Exit Facility, the Exit Facility Commitment Parties will receive a backstop fee equal to 7% of the issued share capital in the reorganised Group after giving effect to the Proposed Restructuring, including the Rights Offering (the "Debt Backstop Fee").
Expected treatment of creditors under the Proposed Restructuring
Under the terms of the Proposed Restructuring, the Legacy Lenders are expected to receive, in consideration for their claims under the Legacy Facilities and subject to the Conditions: (i) 100% of the equity in the reorganised Group, subject to dilution from the Rights Offering, the Equity Backstop Fee and the Debt Backstop Fee (and any equity reserved for a management incentive plan); and (ii) the right to participate in the Backstopped Rights Offering, subject to meeting certain eligibility criteria.
Subject to the Conditions, a settlement has also been reached with the holders of general unsecured claims against each of the Group Chapter 11 Companies.
Marketing process
As announced on 3 January 2023, in parallel with developing a Plan, Cineworld has also been running a marketing process in pursuit of a value-maximising transaction for the Group's assets (the "Marketing Process"). As announced on 24 February 2023, Cineworld received non-binding proposals for some or all of the Group's assets from a number of potential transaction counterparties.
Having discussed with its key stakeholders, Cineworld has determined that, absent an all-cash bid significantly in excess of the value established under the Proposed Restructuring, the Marketing Process as it relates to the Group's business in the US, the UK and Ireland will be terminated. Cineworld and its key stakeholders continue to consider the proposals that were received in respect of its 'Rest of the World' business (outside of the US, the UK and Ireland) (the "RoW Business") and a process is underway with the bidders for the RoW Business to assess whether an acceptable sale transaction can be completed. It is expected that the Plan will provide sufficient flexibility to accommodate a sale of the RoW Business, assuming that the Marketing Process leads to a sale transaction supported by the Group Chapter 11 Companies and their stakeholders. As previously announced, it is not expected that any sale transaction would provide any recovery for holders of the Company's equity interests.
Timing of emergence
As announced on 24 February 2023, Cineworld expects to emerge from the Chapter 11 Cases during the first half of 2023. Although any sale transaction resulting from the Marketing Process, among other things, may delay emergence beyond the first half of 2023, the Group remains committed to emerging from the Chapter 11 Cases as expeditiously as possible.
Business as usual
During the restructuring process, Cineworld continues to operate its global business and cinemas as usual without interruption. Cineworld and its brands around the world - including Regal, Cinema City, Picturehouse and Planet - are continuing to welcome customers to cinemas as usual. The Group continues to honour the terms of all existing customer membership programmes, including Regal Unlimited and Regal Crown Club in the United States and Cineworld Unlimited in the UK.
Accounting reference date
The Company also announces that, given the ongoing Chapter 11 Cases, it is changing its accounting reference date and financial year end from 31 December to 30 June, effective for the 2022 financial year.
Additional information
Information regarding the Chapter 11 Cases (including a copy of the RSA, with a copy of the BCA as an exhibit thereto) is available at the following website: https://cases.ra.kroll.com/cineworld. Once the Plan and the Disclosure Statement are filed with the Bankruptcy Court, copies of those documents will be made available on that website.
For further information please contact:
Cineworld Group plc: Israel GreidingerNisan CohenManuela Van Desselinvestors@cineworld.co.uk +44 (0)20 8987 5000FGS Global (UK) (Corporate PR Adviser): James Leviton / James ThompsonCineworld-LON@fgsglobal.com +44 (0)20 7251 3801
FGS Global (US) (Corporate PR Adviser): Kal Goldberg / Lizzie Hyland / Monique SidhomCineworldMedia@fgsglobal.com+1 (646) 970-4727
PJT Partners LP (Financial Adviser): Simon Lyons / Kush Nanjee+44 (0)20 3650 1100Steven Zelin / Michael Schlappig +1 212 364 7800
About Cineworld
Cineworld was founded in 1995 and is now one of the leading cinema groups in Europe. Originally a private company, it re-registered as a public company in May 2006 and listed on the London Stock Exchange plc in May 2007. Cineworld's acquisition of Regal Entertainment Group has created the second largest cinema business in the world (by number of screens). Cineworld currently operates in the United Kingdom, Ireland, Poland, the Czech Republic, Slovakia, Hungary, Bulgaria, Romania, Israel and the United States.
Forward looking statements
This announcement is not intended to and does not constitute and should not be construed as, considered a part of, or relied on in connection with any information or offering memorandum, security purchase agreement, or offer, invitation or recommendation to underwrite, buy, subscribe for, otherwise acquire, or sell any securities or other financial instruments or interests or any other transaction, including with respect to the Rights Offering.
This announcement contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Group and certain plans and objectives with respect thereto, including with respect to the Group's ordinary shares. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "hope", "aims", "continue", "will", "may", "should", "would", "could", or other words of similar meaning. These statements are based on assumptions and assessments made by the Group in light of their experience and their perception of historical trends, current conditions, future developments and other factors the Group believes appropriate. By their nature, forward-looking statements involve risk and uncertainty, because they relate to events and depend on circumstances that will occur in the future and the factors described in the context of such forward-looking statements in this document could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and you are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this document. The Group does not assume any obligation to update or correct the information contained in this document (whether as a result of new information, future events or otherwise), except as required by applicable law.
There are several factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are changes in the global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or dispositions (including any potential sale by the Group) and the risks, uncertainties and costs related to the Rights Offering, the Exit Facility, and the Chapter 11 Cases, including, among others, the timing of any emergence from the Chapter 11 Cases and the risk that any Plan may not be confirmed or implemented at all.
Nothing in this announcement is intended as a profit forecast or estimate for any period and no statement in this announcement should be interpreted to mean that earnings, profit or earnings or profit per share or dividend per share for the Group for the current or future financial years would necessarily match or exceed the historical published earnings, profit or earnings or profit per share or dividend per share for the Group.
PJT Partners LP, Alix Partners LLP, Kirkland & Ellis LLP and Slaughter and May (collectively, the "Advisers") are providing advice to Cineworld (and other members of the Group) and no one else in connection with the matters referred to in this announcement. The Advisers will not regard any other person as their client in connection with such matters, nor will they be responsible to any other person for providing the protections afforded to their clients or for providing advice in relation to such matters.