Theater operator Cineworld Group Plc plans to raise $2.26 billion in a restructuring plan to slash debt and exit bankruptcy.
(Bloomberg) — Theater operator Cineworld Group Plc plans to raise $2.26 billion in a restructuring plan to slash debt and exit bankruptcy.
The world’s second-largest theater chain said it’s reached a deal with 83% of lenders, a milestone after it filed for Chapter 11 protection in September.
Cineworld had taken on heavy debt to acquire US chain Regal, but the Covid-19 pandemic pushed it into distress after lockdowns delayed the release and production of blockbuster movies and shuttered cinemas for months. Vue International also agreed a restructuring with its lenders last year.
A proposed capital raise will comprise of new debt in a so-called exit facility worth $1.46 billion, and the issuance of new stock to pre-bankruptcy lenders will yield gross proceeds of $800 million, according to a document filed Sunday with the Bankruptcy Court for the Southern District of Texas.
Cineworld expects to emerge from bankruptcy in the first half of the year. The capital raise proceeds will go to pay debtor claims, fees and other expenses, and working capital for the company’s next steps, according to the filing.
Lenders will receive equity in the reorganized group in exchange for debt, reducing its total debt pile by $4.53 billion, the company said in a London stock exchange statement Monday. Cineworld’s existing equity holders will be wiped out under the plan.
The company will also enter into a revolving credit facility of as much as $200 million. The group’s creditors are drawing up plans for a new board and executive team after nine years under Chief Executive Officer Mooky Greidinger and his brother, deputy CEO Israel Greidinger, Bloomberg reported last week.
The process could also see the chain broken up in the coming months.
Cineworld had been marketing the group to potential buyers, but unless it receives an all-cash bid greater than the restructuring deal’s value, a sale process for its US chain Regal and UK and Ireland operations will be terminated, it said.
However, Cineworld and its lenders are assessing proposals made in a parallel process to sell its “rest of world” units in Eastern Europe and Israel, which has drawn interest from hedge fund Elliott Investment Management, according to a person familiar with the discussions, as well as private equity firm CVC Capital Partners, according to Sky News.
(Updates with London stock market statement and context throughout)
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