Huge cinema chain could close 49 sites after landlords vote against rent cuts

A MAJOR cinema chain could be forced to close dozens of branches after landlords rejected a restructuring plan this week.

Cineworld announced a restructuring plan at the end of July to help shore up the company’s finances and return it to profitability.

A restructuring plan allows a company to rework its balance sheet, restructuring debts and releasing cash into the business.

As part of this proposal, the chain has sought to renegotiate rent agreements for 49 cinemas.

Struggling businesses often do this to help lower their operating costs and help retain more of their brick-and-mortar estate.

But, landlords don’t need to accept what’s put forward in these discussions.

And British Land, Landsec and Legal & General Investment Management all voted against the cinema operator’s restructuring plan this week, Sky News reports.

This means that up to 49 Cineworld sites remain at risk.

According to a document circulated to creditors, 33 Cinema sites “require a reduction of rent to ERV [Estimated Rental Value] Rent in order to place the sites on a viable long-term footing”.

Another 16 leases require reductions to turnover rent or zero rent to render them financially viable.

It’s understood that 38 branches remain unaffected and aren’t part of the rent negotiations.

All parties declined to comment.

Cineworld has already confirmed that it will close six of its multiplexes.

Venues in Glasgow, Bedford, Hinckley, Loughborough, Yate, and Swindon will shut in the coming months.

What happens next?

Although Cineworld’s landlords wield significant influence, their refusal to accept the chain’s restructuring agreement will have little impact, as their owners are now among its largest creditors.

Cineworld’s creditors still need to decide whether or not to accept the ailing chain’s restructuring plan.

If they do, they can force through the proposals.

A creditor is an individual, business, or financial institution to whom the company owes money or is obligated to repay a debt.

As of July 2024, the cinema chain operates out of 100 Cineworld branded screens across the UK and Ireland as well as a further 28 under the Picturehouse brand.

For now, the chain’s screens remain fully operational and open as usual.

CINEWORLD’S DECLINE

Cineworld emerged from Chapter 11 bankruptcy in the US late last year.

Filing for a Chapter 11 bankruptcy means a company intends to reorganise its debts and assets while remaining in business.

At the time, the future of the chain’s 129 UK and Irish cinemas appeared to be in danger.

The company’s shares plunged almost 99% in the five years to 2023, as it was hit particularly hard by the pandemic and the enforced closure of its cinema sites.

Shortly after, Cineworld’s UK arm collapsed into administration on July 31.

The cinema chain was delisted from the London Stock Exchange a day later.

When a company enters administration in the UK, all control is passed to an appointed administrator, who must be a licensed insolvency practitioner.

Since then appointed administrators at Alix Partners have been helping the chain formulate its restructuring plan.

The business has posted significant losses as it has come under pressure from platforms offering streaming services, such as Netflix and Amazon Prime.