Significant Additional Liquidity Secured
Cineworld Group plc (LON:CINE) has announced it has secured significant additional liquidity whilst implementing further operational measures to deliver enhanced profitability over the long term:
· Secured a new debt facility of $450m and issue of equity warrants
· Agreed bank covenant waivers until June 2022
· Extended maturity of the $111m incremental RCF from December 2020 to May 2024
· Accelerated tax year closure to bring forward an expected tax refund of over $200m to early 2021
Shares in Cineworld Group were up over 17% on the new at the time of writing.
Cineworld believes that together these steps will provide the Group with financial and operational flexibility until lockdown restrictions in key jurisdictions are eased and studios are able to bring their enhanced pipeline of major releases back to the big screen.
Alicja Kornasiewicz, Chair of Cineworld Group plc, commented:
“In light of the severe financial challenges facing the Group arising from the significant disruption to the entire industry, the Board is confident this additional liquidity will preserve and maximise shareholder value over the long term.”
Mooky Greidinger, CEO of Cineworld Group, commented:
“The measures we are announcing today deliver over $750m of extra liquidity to support our business. Over the long term, the operational improvements we have put in place since the start of the pandemic will further enhance Cineworld’s profitability and resilience. The Group continues to monitor developments in the relevant markets in which we operate and our entire team is focused on managing our cost base. We look forward to resuming our operations and welcoming movie fans around the world back to the big screen for an exciting and full slate of films in 2021.”
New Debt Facility and Issue of Equity Warrants
The Group has agreed the terms of a new $450m 3 year non-call facility, which matures on 23 May 2024. After accounting for the New Debt Facility, the Group will have aggregate gross debt financing of $4.9bn with a weighted average interest rate of approximately 4.5%. The New Debt Facility also includes certain financial and operating covenants and entitles the lenders to appoint a board observer.
Alongside the New Debt Facility, the Company will issue to participating lenders 153,539,786 equity warrants representing in aggregate 9.99% of the fully diluted ordinary share capital of the Company assuming full exercise of the warrants. Further details are set out below.
Covenant Waivers and Extension of the $111m Incremental RCF
We are also pleased to have agreed with our relationship banks:
· A waiver of all bank financial covenants until June 2022; and
· An extension of maturity of the $111m incremental RCF from December 2020 to May 2024.
Further Operational Cost Savings
The Group has implemented actions to mitigate the impact of closure of cinemas across its estate, whilst prioritising the welfare of our employees, customers and other stakeholders.
The Group has agreed certain material abatements and long term rent deferrals with key landlords, in conjunction with new lease agreements in some circumstances and discussions are continuing in relation to other potential abatements and deferrals. In addition, all new Capex programmes are currently on hold.
These actions, together with a number of other operational initiatives, has meant the Group has successfully reduced its monthly cash expenditures to approximately $60m whilst cinemas are closed.
Given the uncertainty of the duration of the Covid pandemic, the Group has worked with its financial advisors to plan for multiple scenarios. The Group base case scenario assumes a reopening of cinemas no later than May 2021. Under this base case scenario, the Group has sufficient headroom for 2021 and beyond. In the event of a further delay to the cinema reopening, the Group expects to retain sufficient liquidity for a number of additional months, but may require lender support in order to deploy that liquidity.
Despite the success of these cost saving actions and the other measures announced today, the Group will continue to consider all options to ensure that its business remains viable in light of the uncertainties regarding the duration of the Covid pandemic and its potential impact on medium-term operating restrictions and the content pipeline. These options will include determining how the proceeds of the financing announced today should best be utilised by the US and UK businesses and the relevant subsidiaries within the Group, and continuing discussions with landlords across the Group’s estate and other key stakeholders to manage costs.
Further details of the Equity Warrants
The warrants will not be listed but will be tradeable. For a period of two years, if the Company issues equity securities at below 80.65 pence per security and that issue is at a discount to the then market price (or 46.09 pence per security if lower), the terms of each warrant will be adjusted so that each warrant holder would maintain the same pro rata equity interest in the Company as immediately prior to the relevant issue of securities. The warrants also benefit from customary anti-dilution protections in the case of other corporate actions. The warrants represent 11.18% of the Company’s current issued share capital.