Cineworld is set to receive a £35m investment to refurbish its UK cinema estate if its restructuring plan, which aims to close sites and reduce rent, gains approval next month. This injection of funds will be crucial in modernising Cineworld’s British locations as it competes with better-performing rivals in the cinema industry.
The investment, outlined in a document circulated to creditors, is part of a broader effort to overhaul Cineworld’s financial situation after the company was severely affected by the pandemic, which saw a significant drop in film releases. The company’s restructuring plan has sparked concern among landlords, some of whom are reportedly considering voting against the proposals.
The US-based parent company of Cineworld has pledged the £35m investment for capital expenditures, including refurbishing and enhancing viable cinemas. This will only proceed if the restructuring plan is sanctioned by the court, with the creditor vote set for late September.
As part of the proposed restructuring, Cineworld is looking to close six UK multiplexes, while nearly 50 others fall into categories requiring landlords to agree to reduced rents to ensure long-term viability. For 33 of these sites, a rent reduction to their Estimated Rental Value (ERV) is essential for their financial survival. Another 16 sites will need rent reductions or rent-free agreements to remain operational.
Cineworld has faced mounting financial pressures, struggling to pay a quarterly rent bill of £15.9m due in June 2024. Without funding from its US parent company, the UK arm of Cineworld would have been insolvent based on cashflow.
The cinema giant has faced a challenging time since the pandemic, initially exploring the option of selling the business. However, after failing to secure any viable offers, Cineworld shifted its focus to restructuring. The company has been working with advisory firm AlixPartners to manage the process.
Cineworld, which operates over 100 sites across the UK, including the Picturehouse chain, employs around 4,400 people. The company expanded significantly under the leadership of the Greidinger family, acquiring Regal Cinemas in the US in 2018. However, it has struggled with a substantial debt burden, forcing it into Chapter 11 bankruptcy protection in 2022. The company delisted from the London Stock Exchange in August last year as its share price collapsed due to concerns over its future.
With the restructuring plan in motion, other cinema operators are reportedly preparing to step in and take over some of Cineworld’s sites if the company cannot resolve its financial difficulties. The outcome of the creditor vote will be critical in determining whether Cineworld can secure the funding needed to modernise its UK operations and regain stability in the competitive cinema landscape.
