Cineworld court restructuring procedure kicks off in London
A London judge has approved the first step in troubled cinema chain Cineworld’s UK restructuring procedure, giving the company the green light to call a meeting of creditors, including landlords, to negotiate a deal.
Cineworld has been in financial difficulties on both sides of the Atlantic, with US debts of more than $1.8bn (£1.4bn). Even so, the US company emerged from Chapter 11 insolvency last year and has been supporting the unprofitable UK business.
At a hearing today, Tom Smith KC, acting for the UK company, said it had been unprofitable since 2020 and, as of May this year, it had borrowed around $65m from its US parent.
A London judge has approved the first step in troubled cinema chain Cineworld’s UK restructuring procedure, giving the company the green light to call a meeting of creditors, including landlords, to negotiate a deal.
Cineworld has been in financial difficulties on both sides of the Atlantic, with US debts of more than $1.8bn (£1.4bn). Even so, the US company emerged from Chapter 11 insolvency last year and has been supporting the unprofitable UK business.
At a hearing today, Tom Smith KC, acting for the UK company, said it had been unprofitable since 2020 and, as of May this year, it had borrowed around $65m from its US parent.
When the UK group was unable to pay its quarterly rent bill of £19m in June, the US parent agreed to lend it the money on the condition that the UK group restructures its business, leading to these proceedings, Smith said.
One important goal of the restructuring, judge Mr Justice Johnson said today, is to reduce the company’s rent bill. Cineworld claims that many of the rents are significantly higher than the market rate and wants to cut them to “market rates”.
If that does not happen, the UK company will be unable to pay its rent of £19m at the end of September and “a default will occur”, the judge said.
In today’s hearing, the judge ordered that there should be a meeting of creditors to consider Cineworld’s proposals. Smith said it would likely take place on 18 September.
There will be a vote and, if the majority of creditors approve the plan, it will go back to the judge in September for approval.
“It is not my function at this time to consider whether the restructuring plan should or should not be sanctioned,” the judge said. “That will be dealt with at the [approval] hearing.”
Only Cineworld’s lawyers attended today’s hearing. That is unlikely to happen next time.
“We have been in correspondence with Hogan Lovells, who represent two of the landlords, and they have not come here today,” Smith, for Cineworld, said.
“Maybe they are keeping their powder dry for the [approval] hearing.”
Photo by Gareth Everett/Huw Evans/Shutterstock
