A Texas bankruptcy judge has approved a plan that puts Cineworld, the world's second-largest movie theater operator, on the path to emerge from bankruptcy proceedings in July with a whittled down U.S. real estate footprint.
Judge Marvin Isgur, who is overseeing the case filed in U.S. Bankruptcy Court for the Southern District of Texas, confirmed the plan Wednesday, saying the deal was reached at arm's length and would help preserve jobs and capital. The restructuring is expected to help Cineworld, which had 747 locations in 10 countries when it filed for Chapter 11 bankruptcy protection last year, cut its debt load that had reached more than $6 billion.
In the confirmation plan, Cineworld and its subsidiaries are ridding themselves of $4.53 billion in a debt-for-equity exchange with its existing lenders but wiping out existing shareholders. In the deal with lenders, the company will raise $800 million in gross proceeds, with $1.46 billion of new debt financing. Earlier in the week, Cineworld Group said it plans to file for administration in its home country of England, where it has its headquarters just outside of London, once it emerges from the U.S. bankruptcy cases. A company files for administration in the United Kingdom when it becomes insolvent.
"The confirmation of our plan is a significant milestone as Cineworld moves towards emerging from this process in a strong financial position and with a more resilient capital structure," Cineworld CEO Mooky Greidinger said in a statement Thursday. "Cineworld remains focused on refining and growing our global business and cinemas for our guests around the world and delivering the most immersive and cutting-edge cinema experiences."
U.S. Real Estate
Cineworld's U.S. real estate leases, mostly under the Regal brand, played a key role in needing to reorganize the company with deferred rent payments hitting the theater chain's bottom line and weighing it down in debt.
Cineworld plans to have a much smaller U.S. real estate footprint once it emerges from bankruptcy, with 350 leases being assumed, according to court filings. That's down from 505 U.S. theaters Cineworld had at the time it filed for bankruptcy in September 2022.
Cineworld is rejecting some of its leases with one of its largest U.S. landlords, San Diego-based Realty Income Corp., which it had been negotiating with on about 40 leases. Cineworld is assuming about 20 leases for theaters owned by Realty Income or its affiliates, according to court records.
One of Cineworld's other largest landlords, Indianapolis-based Simon Property Group, has about 24 leases being assumed as part of Cineworld's going-forward plan.
Once Cineworld emerges from bankruptcy in mid-July, it will be owned by a newly incorporated company controlled by the group's lenders being referred to as NewCo. A spokeswoman for Cineworld told CoStar News she did not have any information to share about the entity's new U.S. real estate footprint beyond what was available in its confirmation plan.
A board of directors comprising seven members for NewCo will also be appointed once Cineworld exits bankruptcy. Former Pepsi CEO Eric Foss has been named chairman of the board of NewCo. Previously, Foss was chairman and CEO of Aramark and Pepsi and has extensive global business experience in the food, beverage and service industries.
The selection of NewCo's additional six board members is ongoing, the company said in a statement Thursday. The board is expected to include NewCo's CEO who cannot also hold the position of chairman, according to court documents.