Cineworld’s woes have been ongoing for some time. A restructuring in 2022-2023 through Chapter 11 in the US bought the group some breathing space but didn’t address the UK group’s expensive leases. Continuing difficult trading conditions in the UK haven’t helped either. 

Yesterday the High Court approved a restructuring plan which compromises Cineworld’s secured debt obligations and recapitalises the group, but also compromises obligations owed under various leases. The tricky thing was that Cineworld had previously agreed (in the context of bilaterally negotiated rent reductions) that it wouldn’t seek to further amend the leases if it subsequently sought a restructuring plan, scheme of arrangement or a company voluntary arrangement. Creditors voted in favour of the restructuring plan in sufficient numbers to ‘cram down’ those who didn’t, and so two landlords challenged their inclusion within the scope of the restructuring plan on the basis of those bilateral agreements. However, the court held that this wasn’t a bar to it approving a restructuring plan – the bilateral agreements documenting the arrangement were themselves capable of being compromised under the restructuring plan.

The case is another step in the development of the use of restructuring plans, which this year has seen market shaping decisions in relation to the restructurings of Adler (see Adler restructuring plan: the Part 26A procedure comes of age with the first test of cross-class cram down in Court of Appeal), McDermott and Aggregate (see Restructuring plans post-Adler: English court approves McDermott's restructuring plan, Aggregate required to re-convene meeting) amongst others. It also highlights the increasing use of restructuring plans to restructure leasehold portfolios (other examples include the restructuring plans in 2023 of Fitness First and in 2021 of Virgin Active). This was traditionally the domain of the company voluntary arrangement, but using a restructuring plan instead brings two additional benefits – the ability to “cram down” dissenting creditors and to compromise secured debt.  

Permission to appeal has been granted to one of the opposing landlords, so there may yet be a further sequel in the Cineworld saga.