Key points:
- Cineworld shares surged 111.2% after settling with landlords and creditors.
- The company agreed to pay its landlords for accrued rent since September.
- The settlement opens the path for Cineworld to exit bankruptcy protection.
The Cineworld Group plc (LON: CINE) share price surged 111.2% after reaching a settlement with its landlords and junior creditors regarding their opposition to its proposed $1 billion debt repayment plan.
The landlords and junior creditors, who the company also owes, had opposed Cineworld’s arrangement with its senior creditors, which gave it access to a $785 million loan at the start of the bankruptcy case, approved by the U.S. Bankruptcy Judge Marvin Isgur in Houston.
Also read: The Best Shares To Buy Now.
Cineworld agreed to pay at least $20 million in rent, which accrued since September 30, 2022. The movie theatre company initially refused to pay the rent as it filed for Chapter 11 Bankruptcy proceedings with less than $4 million in cash. The firm initially said it would only make the payments after its bankruptcy proceedings ended.
The agreement will also fast-track the end of Cineworld’s bankruptcy as envisioned by its CEO, Mooky Greidinger, in Q1 2023. The company also agreed to explore a potential business sale and to allow creditor input within its business plan.
Investors reacted positively to the announcement, and with good reason. I had previously written about Cineplex’s interest in Cineworld’s Regal Cinemas franchise in a deal it intends to fund via a mix of stock and debt. However, there have been zero updates on whether Cienworld is open to the idea after the two companies failed to reach an agreement.
Following Cineworld’s agreement with the junior creditors, the company can now move ahead with the planned borrowing of an additional $150 million and the $1 billion debt repayment as agreed with its senior secured creditors.
The agreement could mark a turning point for Cineworld, paving the way for the firm to exit bankruptcy, but many will be keen to see if the company is willing and ready to sell its prized Regal Cinemas brand.
I would also like to see if potential bidders will be willing to offer the $3.6 billion paid by Cineworld to acquire the franchise in December 2016. Meanwhile, I’d adopt a wait-and-see approach towards the company.
*This is not investment advice.
Cineworld share price.
The Cineworld share price surged 111.2% to trade at 5.01p, rising from Monday’s closing price of 2.35p.