A U.S. bankruptcy judge granted Cineworld Group, the parent company of Regal Cinemas, access to more than $1 billion in funds after the world's second-largest cinema operator reached a settlement with its landlords and lenders about an hour ahead of a triggered interest accrual on the debt.
U.S. Bankruptcy Judge Marvin Isgur signed the order Monday afternoon that includes Cineworld borrowing an additional $150 million and making a $1 billion debt repayment.
The judge signed the order after landlords and junior creditors dropped their oppositions to the repayment of $1 billion debt once Cineworld, based outside London, agreed to pay at least $20 million in rent accrued after Sept. 30. The rents are determined in part by movie theater attendance with at least $5 million earmarked for a four-month period, according to an attorney representing Cineworld.
The bankruptcy filing has given Cineworld a reprieve from paying a hefty billion-dollar judgment in a Canadian court and the ability to negotiate with creditors on its debt of at least $5 billion and renegotiate some U.S. leases. The development shortly before the deadline affects the owner of 747 movie theater locations with 9,139 screens in 10 countries,
Prior to the agreement, Cineworld and 104 affiliates involved in the Chapter 11 bankruptcy case hadn't intended to make any post-September rent payments until after it emerged from bankruptcy proceedings. The company's ability to retroactively reject real estate leases through the U.S. Bankruptcy Court for the Southern District of Texas in Houston was a point of contention from at least one landlord.
The agreement was reached an hour ahead of the triggered interest expense on the $1 billion repayment to creditors. Isgur told Cineworld and its affiliates to "get your wires ready" to begin making the court-approved payments while waiting for his order to hit the docket.
Cineworld did not immediately respond to requests to comment about the court ruling.
The decision comes a month-and-a-half after Cineworld filed for bankruptcy protection and Isgur decided to only approve part of the financing totaling $785 million. He deferred judgment on the $1 billion repayment that theater operator, with 747 locations and 9,139 screens in 10 countries, said it needed to restructure its business.
As part of the agreement, Cineworld also plans to allow creditors to offer input on its proposed going-forward business plan and explore a potential sale of the business. Considering the widespread landlord and creditor opposition at the beginning of the bankruptcy proceedings, Isgur said the parties reaching an agreement was an "amazing" feat.
In all, creditors filed 15 objections to the loan in court, with another dozen objections resolved by the company prior to them being filed, said Christopher Marcus, a partner at Kirkland & Ellis, who is representing Cineworld in its bankruptcy filing, during the hearing Monday. Marcus said the parties worked over the weekend to get the proposed order in front of the court ahead of an interest accrual on the debt.
"We are still moving expeditiously and could sell if a transaction exists," Marcus told the court, adding Cineworld plans to present a plan to the court in the weeks ahead leading up to the end of the year.
Robert LeHane, an attorney with Kelley Drye & Warren, who represents landlords tied to 120 movie theater locations, told the court the order was not perfect but it was a "reasonable result." Other landlord attorneys echoed LeHane's sentiments to the bankruptcy judge.