Cineworld’s aggressive UK restructuring plan was approved by a high court judge in London yesterday (September 30) despite opposition from landlords.
The plan aims to ensure the debt-laden and currently (by its own admission) “deeply unprofitable” exhibition giant will be provided with the funds needed to cover its quarterly rent charges to landlords, and will avoid having to file for administration.
The section 26A restructuring plan will see Cineworld UK receive £16m of equity funding from its US parent to fund its immediate liquidity needs, with further funding of £35m now expected to be available to fund capital expenditure.
“We are pleased that the court has approved our restructuring plan. This will enable us to re-set the business for the long-term and ensure a sustainable future for Cineworld in the UK,” a Cineworld spokesperson said.
However, one landlord, UK Commercial Property Finance Holdings Limited (UKCP) has been given permission to appeal.
Under the restructuring, many of Cineworld’s landlords will face substantial rent reductions in order to place them on a viable footing.
The exhibitor claimed that when the US group emerged out of Chapter 11 bankruptcy in 2023, its reorganisation plans did not properly address the UK group’s troubled “lease portfolio”.
High rent costs combined with the slowdown in cinemagoing have ensured the UK Group is still operating at a loss.
Cineworld has 101 sites in the UK and around 4000 staff members. The exhibitor has claimed that many of those sites are significantly “over-rented” (meaning that the contractual rent is in excess of market rent).
Six unprofitable cinemas have already been earmarked for closure: Glasgow Parkhead, Bedford, Hinckley, Loughborough, Yate and Swindon - Regent Circus.
Some landlords have felt aggrieved about the exhibition giant’s behaviour, with leases agreed in 2023 now revised under the new plan.
Deals struck last year with Cineworld by UKCP and Crown Estates involved a reduction in rent in return for an agreement that sites would not be further affected in the event of a restructuring.
Cineworld said certain sites involved in the restructuring plan (Swindon, Glasgow, Harlow Queensgate and Newcastle) are now “uneconomic on existing terms”. The landlords are now facing further rent reductions - and, in the case of Swindon - outright closure.
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