Cineworld has received approval for its restructuring plans from a High Court judge, preventing the potential threat of administration for four of its companies. The companies involved in the UK arm of the world’s second-largest cinema chain, namely Cine-UK Ltd, Cineworld Cinemas Ltd, Cineworld Cinema Properties Ltd, and Cineworld Estates Ltd, were facing the risk of administration if the restructuring plans were not sanctioned, as revealed in court.
The approved restructuring entails releasing £16 million of new equity funding from the companies’ indirect parent firm to address their immediate financial requirements. Additionally, further funds of up to £35 million will be made available. As part of the restructuring, the four companies will also renegotiate the leases of some of their 100+ sites, resulting in the closure of five sites deemed “commercially unviable.”
Mr Justice Miles gave his approval for the restructuring on Monday, emphasising in a written judgment that the court should favour sanctioning the plans. The court was informed that the four companies, operating 101 sites and employing 4,401 staff, are presently unprofitable due to the impact of the Covid-19 pandemic and strikes by screen actors and writers last year, according to their barrister, Tom Smith KC.
The US arm of the Cineworld chain had provided around 65 million dollars to the UK firms to sustain operations until June this year, with an additional £16.7 million covering rent due until the end of September. This financial assistance was conditional on the companies undergoing a restructuring to address their financial challenges.
Mr Justice Miles dismissed an attempt by landlords of four sites, the Crown Estate and UK Commercial Property (UKCP), to block the companies from renegotiating the leases of the sites, stating that the restructuring was imperative to avoid imminent administration. While acknowledging that the landlords may feel aggrieved by the restructure, the judge mentioned that the previous renegotiations had not adequately addressed the cash flow shortfall faced by the companies.
Following the court ruling, a spokesperson for Cineworld expressed their satisfaction with the approved restructuring plan, highlighting that it would enable the business to be reset for long-term sustainability and ensure a viable future for Cineworld in the UK.