The Crown Estate has kicked off a legal battle with Cineworld over claims that the chain is acting unfairly by forcing through sweeping cuts to its rental bills to stay afloat.
The company – which runs the King’s estate, including the sites of three Cineworld cinemas – has lodged a legal challenge against the cinema group’s restructuring plan, which was voted through earlier this week.
In the challenge, which was made alongside fellow Cineworld landlord Tritax, the Crown Estate claims the cinema chain’s radical plans to cut the amount of rent it pays to landlords went against earlier pledges over leases.
The case centres on Cineworld securing rent reductions last year by promising it would protect leases on certain sites, including those run by the Crown Estate.
Those sites are now among those facing sweeping cuts under Cineworld’s survival plan, which it has said is necessary to avoid collapse.
Lawyers for the Crown Estate said: “What [Cineworld] said they planned not to do, they are now doing.”
They added: “The court should not relieve Cineworld of the consequences of the bargains it struck.”
The legal wrangling threatens to throw Cineworld’s future into fresh doubt following years of turmoil.
Cineworld initially was forced to file for bankruptcy protection in the US in 2022 amid spiralling debts and weaker audience numbers in the wake of the pandemic.
Last year, following a share price collapse in London, Cineworld delisted from the London stock market. It was taken over by lenders in a debt-for-equity swap.
However, it has remained under pressure and earlier this year warned it was facing steep payments which it would be unable to make, including millions of pounds worth of rent.
Cineworld ‘must restructure to get cash from owner’
Lawyers for Cineworld on Thursday said they needed to restructure the UK business in order to get more cash from its US owner.
Tom Smith, a barrister for Cineworld, said: “The UK part of the group is presently unprofitable.”
He said Cineworld would collapse into administration without fresh funding from its owner, saying: “There is no prospect of raising the money from anywhere else.
“What is crucial is [that] we are in a situation where we’re on the verge of insolvency. The alternative to this plan is insolvency. It’s not a case where [Cineworld] continues living happily ever after.”
A judgment on the case is expected on Monday.
It is not the first time the Crown Estate has challenged a restructuring. Last year, it was among those opposing a restructuring of Fitness First health clubs, which sought to cut rents at 34 sites and close 10 gyms. A High Court judge ultimately approved the plan.