The nation’s largest cinema advertising network, National CineMedia, announced tonight that it has filed a voluntary Chapter 11 petition in US District Court in the Southern District of Texas — where one of its largest shareholders and customers, Regal parent company Cineworld, just filed one submitted a restructuring plan from the insolvency itself.
Cineworld submitted the application in September and is hoping for approval by the end of May. National Cinemedia’s process should move faster as it has filed a comprehensive restructuring agreement, already in hand and backed by secured lenders, which it says provides “a clear roadmap … to get out quickly without losing operations or customer relationships.” disturb”.
The step is not a shock. The company recently missed and then extended the grace period on an interest payment originally due in mid-February, which has already placed it in technical default with major rating agencies and sparked speculation of a possible Chapter 11 or out-of-court restructuring. The auditor had raised concerns about its ability to continue the business last fall, and its share price has been kept at penny-stock levels. The business has taken some time to recover from the closure of cinemas during Covid and a slow box office recovery. Cineworld has sought to terminate or roll back a long-term contract between National Cinemedia and Regal as part of its bankruptcy.
The agreement provides for all of the company’s debt to be converted into equity. It will take over critical contracts after Chapter 11 comes out, and the current administration would be retained to ensure continuity.
“Today’s transactions will position us to deliver the strong results that our advertisers and cinema partners have come to expect from us today and in the future,” said CEO Tom Lesinski. “We begin this process with the overwhelming support of our secured lenders and key stakeholders, from whom we expect to emerge quickly and responsibly as a stronger company.”
Converting all of the company’s funded debt into equity would completely deleverage its balance sheet. Holding company NCM will have an ownership interest of approximately 14% in the restructured company. Unless a formal creditors’ committee is formed, all holders of general unsecured claims under the RSA will be paid in full in the ordinary course. The company will continue to operate with existing cash on hand, which provides liquidity.
After the restructuring, it will be “well positioned as moviegoers enjoy the resumption of a regular schedule of major film releases following a pandemic disruption.”
In fact, the move comes as the box office hit a peak with last weekend’s release of The Super Mario Bros. Movie, its biggest opening weekend debut of the year.
The company also submitted a so-called first-day order for approval, including requests to pay wages and benefits to employees. It will continue to maintain its existing customer programs, partnerships and relationships with cinema operators as part of normal business operations.