A major UK cinema chain has gone to the High Court in a last ditch attempt to save numerous theatres being axed and thousands losing their jobs.
The four companies which are part of the world’s second largest cinema chain are in hot water and are ‘presently unprofitable’, the court heard on Thursday.
The US branch of the troubled company has agreed to put forward funding to keep them afloat if they are granted the requested restructure according to lawyers.
However they say the four ‘plan companies’ will enter into administration if the plans are not approve, their lawyers say.
Published proposals revealed that more than 100 Cineworld Cinemas were ‘uneconomic’ and their leases would need to be renegotiated.
Cineworld has gone to the High Court in a last ditch attempt to save numerous theatres being axed and thousands losing their jobs.
The four companies which are part of the world’s second largest cinema chain are in hot water and are ‘presently unprofitable’, the court heard on Thursday Pictured: The Bedford site
They also propositioned closing six sites because they were ‘commercially unviable’.
Among the companies impacted include Cine-UK Ltd, Cineworld Cinemas Ltd, Cineworld Cinema Properties Ltd and Cineworld Estates Ltd.
Tom Smith KC, for the Cineworld companies, said: ‘If the plans are not sanctioned, the plan companies will not have sufficient funds to meet their payment obligations to creditors.’
He continued: ‘In these circumstances, the plan companies’ directors will likely have no choice but to file for administration.’
However the Crown Estate and UK Commercial Property (UKCP), who are the landlords of four of the sites Newcastle, Harlow, Glasgow Renfrew and Swindon want to block the proposals.
Both organisations have requested an injunction to stop the cinema chain from ‘compromising’ their rental agreements.
Ben Shaw KC, for the Crown Estate and UKCP, said there would be ‘adverse consequences’ for the landlords if the leases were subject to restructuring plans. including receiving just one month’s rent.
He said: ‘One of the things they bargained for was the plan companies not coming back for a second bite of the impairment cherry.’
He added: ‘What the plan companies promised not to do is precisely what they are now doing.’
Mr Smith said that it was fair to treat all landlords equally, and that ‘there was never any intention’ to ‘impose a further compromise’ through restructuring when the agreements were made.
But he explained restructuring was necessary due to ‘unexpectedly poor performance of those sites in the period since the agreements were entered into’.
The Cineworld brand currently runs 101 cinemas in the UK, with another two sites owned by the company under sublet, Mr Smith told the court.
In a previous hearing, it was detailed that the cinemas employs over four thousand people, with the wider group operating in ten countries in total.
However, the business was ‘severely adversely impacted by the Covid-19 pandemic and government restrictions’, the court heard.
Screen actors and writers strikes also saw the cinemas, leaving the chain facing ‘severe financial difficulties’.
However, the landlords of certain sites are trying to block the chain’s restructure stating it would have ‘adverse consequences’ Pictured: The Yate site
Cineworld is being advised by AlixPartners. Pictured: The Swindon, Regent Circus sie
While the group underwent a restructure in the US last year, Mr Smith said in written submissions that the UK arm continued to struggle with a ‘significant’ number of ‘over-rented’ leases, where the rent the company pays is higher than the property’s market value.
The brand announced in July that it would close six sites – in Glasgow Parkhead, Bedford, Hinckley, Loughborough, Yate and Swindon Circus – but that all sites would continue to operate until the restructuring plans were approved.
Mr Smith said that the US arm of the company had provided the UK firms with around $65 million dollars to allow it to keep trading up to the end of June this year, with rent costing £19m also paid for on the condition that the company would undergo a restructuring.
If the plans are approved, £16m of new equity funding from the companies’ indirect parent firm will be released to fund their immediate financial needs, with further funds of up to £35m also made available.
Mr Justice Miles will give his judgment at a later date.