Cineworld Group gets conditional approval of disclosure statement

By Sarah Lizee

Olympia, Wash., April 25 – Cineworld Group plc received conditional approval of the disclosure statement for its Chapter 11 plan of reorganization, according to an order filed Tuesday with the U.S. Bankruptcy Court for the Southern District of Texas.

The combined hearing on final approval of the disclosure statement and confirmation of the plan is scheduled for June 12.

As previously reported, the company has entered into a restructuring support agreement and a backstop commitment agreement with lenders holding about 83% of the group’s term loans due 2025 and 2026 and revolving credit facility due 2023.

The lenders have committed to provide a first-lien exit facility and backstop an equity rights offering in connection with the proposed restructuring.

The restructuring is expected to reduce the group’s funded debt by about $4.53 billion, principally through lenders under the legacy facilities receiving equity in the reorganized group in exchange for the release of their claims under the legacy facilities.

The group will raise $800 million in total gross proceeds through a fully backstopped equity offering to the legacy lenders and a direct equity offering to certain legacy lenders.

The restructuring will also provide $1.46 billion, net of original issue discount, of new debt financing to the group upon emergence from the Chapter 11 cases.

The proceeds of the rights offering and the exit facility will be used to, among other things, repay in full the roughly $1.94 billion debtor-in-possession financing facility entered into by the group when it started the Chapter 11 cases, fund the costs associated with emergence from the cases and fund the go-forward business operations.

Through a settlement, holders of general unsecured claims will receive their allocable share of (a) $10 million in cash and (b) interests in a litigation trust representing a right to recovery to (i) the first $5 million of cash recovered by the litigation trust from interchange litigation claims and (ii) 50% of any cash recovered in excess of $5 million in connection with such claims.

Other secured claims, other priority claims and Midwest facility claims are unimpaired under the plan.

The proposed restructuring does not provide any recovery for holders of Cineworld’s existing equity interests or holders of section 510(b) claims.

The restructuring is subject to a number of conditions, including approval of the Chapter 11 plan by the required thresholds of the group’s creditors – being, in broad terms, at least one half of the legacy lenders and those holding two thirds of the claims outstanding under the legacy facilities.

The RSA parties have committed to vote in favor of the plan and support the proposed restructuring.

Rights offering

Through the backstopped rights offering, the legacy lenders are expected to be offered, pro rata to their holdings under the legacy facilities, the right to purchase shares in the reorganized group in a total purchase amount of $400 million.

The participating lenders will purchase shares in the reorganized group in a total purchase amount of $400 million through the direct allocation offering and be paid a backstop fee equal to 20% of the issued share capital in the reorganized group after giving effect to the proposed restructuring, including the rights offering.

The price payable to subscribe for shares under the rights offering will be set at a 25% discount to an implied equity value of the group after giving effect to the proposed restructuring of $1.48 billion.

Exit facility

The group will be required to run a third-party marketing process to raise a facility of equivalent size on alternative terms, with the proposed $1.46 billion exit facility being provided by the lenders if it is not possible to obtain an alternative facility.

The exit facility commitment parties will receive a backstop fee equal to 7% of the issued share capital in the reorganized group after giving effect to the proposed restructuring, including the rights offering.

Marketing process terminated

As announced on Jan. 3, in parallel with developing a plan, Cineworld was also running a marketing process for its assets.

Cineworld later determined that, absent an all-cash bid significantly in excess of the value established under the proposed restructuring, the marketing process as it relates to the group’s U.S., U.K. and Ireland businesses would terminated.

Cineworld and its key stakeholders continued to consider the proposals that were received in respect of its “rest of the world” business, but recently terminated that process as well.

Alternative exit deal

As previously reported, a minority lender group of Cineworld has been given until May 2 to submit an alternative exit financing proposal to the court.

The minority lender group had objected to the currently proposed financing and backstop commitment, saying that the majority lender group manufactured the need for a backstop by “excluding other lenders from its ranks.”

The minority lender group said at a hearing held Thursday that it has lined up a $1.46 billion exit facility via Jefferies LLC to be able to compete with the existing deal, but it needs additional time to raise more financing for a backstop commitment.

Terms of the alternative financing are largely the same as what is proposed under the RSA exit facility, except the interest rate would be SOFR plus 600 basis points, rather than SOFR plus 850 bps.

The minority lender group said it is confident that it can propose a superior equity rights offering in short order.

Cineworld is a London-based cinema operator. The company filed bankruptcy on Sept. 7, 2022 under Chapter 11 case number 22-90168.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.