Cineworld Renegotiating Leases With 2 Biggest Landlords, Nearing Debt-For-Equity Deal To Exit Bankruptcy

Cineworld, the U.K.-based parent company of Regal Cinemas, is making progress on a path out of bankruptcy, but that path looks to be littered with losses for landlords.

With more than $5B in debt, Cineworld has agreed in principle with all of its creditors for a debt-for-equity swap that would see 35 lenders take collective control of the company, CoStar reports.

Chapter 11 proceedings initiated in September will still include soliciting outside bids to buy Cineworld, and the equity value of its debt has yet to be fully worked out.

A key piece of agreeing on Cineworld's value is the outcome of negotiations with landlords across its portfolio, which totaled 511 U.S. theaters before bankruptcy, Kirkland & Ellis partner Joshua Sussberg told a bankruptcy judge on behalf of Cineworld at a Wednesday hearing. The lenders have enlisted the services of Hilco Global to consult with Cineworld on its footprint, CoStar reports.

Cineworld has already amended 150 leases in the U.S. It has rejected 29 others with approval from the bankruptcy judge and identified a further 77 leases to reject, CoStar reports.

Many of those pending rejections are for locations where landlords have so far refused to negotiate, so a change of heart could result in some of those 77 theaters remaining open.

Among the landlords that have come to the table to negotiate are Simon Property Group and Realty Income Corp., the two companies with the most Regal Cinemas locations in their portfolios, CoStar reports. 

Cineworld gained a bit of a boost from January ticket sales that surpassed expectations by about 20%, leaving the company with over $182M in liquidity, CoStar reports. Part of that liquidity also came from a debtor-in-possession financing deal obtained during bankruptcy proceedings that added more than $1B to Cineworld's total debt load.