Landlords On Alert As Cineworld Restructuring Wipes Out Shareholders

Shareholders in London-listed cinema chain Cineworld will see their investments wiped out should the operator’s latest rescue plan be approved.

The chain, which operates across 128 sites under the Cineworld multiplex and Picturehouse names, filed for Chapter 11 bankruptcy protection in the U.S. in the autumn. After an unsuccessful attempt to sell parts of the business, it has come up with a new plan to exit Chapter 11.

But the news will put many of the UK’s shopping centre landlords that have a Cineworld or Playhouse within their complexes on high alert.

Cinemas have been a vital leisure anchor of many British malls over the past two decades and have been pivotal in attracting dining and drinking operators to co-locate. However, with few blockbusters released since the pandemic, British cinema operators have been struggling.

Cineworld said it had filed a reorganisation plan with a U.S. bankruptcy court to restructure its debts of about £4B, so that it can meet its timetable of exiting bankruptcy protection during the first half of this year.

To do that requires approval from the court plus some creditors.

Cineworld said in a stock exchange announcement that its plan was supported by lenders that hold and control about 83% of loans due to be repaid in 2025 and 2026; and which control its revolving credit facility, which was due to be repaid this year.

Cineworld said its plan was also backed by those holding and controlling about 69% of its outstanding debts.

However, the company added that its high levels of current debt and debt due to be released under the reorganisation plan meant “the proposed restructuring does not provide for any recovery for holders of Cineworld’s existing equity interests”.

Doubts will also be cast over the viability of all its UK sites, with 26 in the London area alone. These include Leicester Square, The O2 in Greenwich and Southside shopping centre in Wandsworth.

The cinema chain, which runs about 750 sites globally, announced earlier in April that it planned to seek nearly £2B in funding after terminating attempts to try to sell its U.S., UK and Irish businesses after it failed to receive any acceptable offers.

The U.S., with over 500 cinemas, is the dominant part of the ailing business and its main rival in the UK is Odeon Cinemas, which is owned by AMC Entertainment Group.