Cineworld, the world’s second-largest movie theater operator, plans to exit Chapter 11 bankruptcy in July with its proposed debt restructuring having the backing of the majority of its lenders.
The United Kingdom-based parent of Regal Cinemas unveiled the latest details of its plan to exit bankruptcy on Wednesday after U.S. Bankruptcy Judge Marvin Isgur approved a motion extending the timeline of hearings tied to the bankruptcy case. Cineworld had previously expected to exit bankruptcy in May.
Cineworld’s restructuring plan includes cutting $4.53 billion of debt but wiping out existing shareholders and transferring the company to its lenders. The plan also gives Cineworld nearly $2.3 billion in exit financing, including a new $1.46 billion loan and the proceeds from the sale of $800 million of equity shares, according to the court-approved plan.
The cinema operator, with 9,139 screens at 747 locations in 10 countries, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of Texas last year in hopes of cutting its debt load that reached more than $6 billion. At the time Cineworld filed for bankruptcy, the company had 505 theaters in the United States, 129 theaters in the United Kingdom and Ireland and 113 theaters in Central and Eastern Europe and Israel.
Cineworld, unable to sell its business as a whole or in parts during bankruptcy proceedings, turned to its lenders. The company’s debt-for-equity swap gives it the financing it needs to remain operational.
The restructuring plan has received support of lenders holding about 99% of legacy debt and at least 69% of outstanding indebtedness under the debtor-in-possession facility, Cineworld said in a statement Thursday.
The company is seeking final court approval in June to exit Chapter 11 bankruptcy sometime in July. Before exiting bankruptcy, Cineworld expects to finalize its going forward U.S. real estate portfolio. Cineworld must file a plan supplement by June 6 that will likely offer more insight about the company’s future U.S. leases.
Cineworld’s U.S. real estate leases played a key role in needing to reorganize the company, executives said, with deferred rent payments hitting the theater chain’s bottom line and weighing it down in debt. Officials estimated average monthly rent obligations per theater increased nearly 30% through July 2022 compared with the full-year 2019.
To date, Cineworld has filed rejection notices for 139 U.S. leases, but many of those leases put in the rejection pile are still being negotiated with landlords, attorneys have told the court.