Cineworld landlords oppose court restructuring plan

The final round of Cineworld’s court-approved UK restructuring procedure kicked off today, with landlords the Crown Estate and UKCP opposing the plan. Cineworld has been in financial difficulties on both sides of the Atlantic, with US debts of more than $1.8bn (£1.4bn). The US company emerged from Chapter 11 insolvency last year and has been supporting the unprofitable UK business. All the Cineworld companies are ultimately owned by a Cayman Islands-based company, and Cineworld UK’s US sister company has been financially supporting the UK business with unsecured loans of more than $65m for over a year. However, Cineworld lawyer Tom Smith KC told the court today the US company has decided it will “no longer throw good money after bad”, and will only continue to financially support the currently unprofitable UK business if it restructures to reduce its overheads. Cineworld UK has a £16m rent bill due at the end of this month that it can’t pay without help from the US. Cineworld UK is now seeking approval from its creditors to restructure the company, including reducing its rent bill. Cineworld claims many of its rents are significantly higher than the “market rate” and wants to cut down accordingly. Creditors approved the deal at a private meeting last week, but some landlords refused to support it. Smith said that UKCP and the Crown Estate didn’t attend the meeting. Even though the plan has received a majority backing, it still needs court approval, which is the reason for today’s hearing. At the start of today’s hearing, Smith, for Cineworld, said lawyers for the Crown Estate and UKCP were at the hearing to oppose the plan. “More last-minute appearances had been threatened, but they have been resolved,” he said. He told judge Mr Justice Miles that if the restructuring isn’t approved, the outcome would be the UK company falling into administration. “There is no prospect of raising money elsewhere,” he said. However, Ben Shaw KC, for UKCP and the Crown Estate, said that he disagreed that the only alternative to the current plan was administration. “The relevant alternative for my client is not an administration, it is being outside the plan,” he said. He added that both of his clients had previously negotiated deals with Cineworld outside the current restructuring plan. “They are now seeking a second bite of the impairment cherry.” Shaw said there is no legal or practical reason that they can’t be excluded from the plan, and reach arrangements with Cineworld though private contracts. “The evidence is, this plan is viable without us,” he said. Smith, for Cineworld, said that both UKCP and the Crown Estate are part of the plan as it is currently formulated. That plan was voted on in last week’s meeting, but both companies chose not to attend and didn’t take part in the vote. The case is scheduled to last two days. The judge said that while he is expecting to give judgment tomorrow, he might need more time. Image © Gareth Everett/Huw Evans/Shutterstock