National CineMedia Files for Chapter 11 – Deadline

The nation’s largest movie theater advertising network, National CineMedia, said it has filed a voluntary Chapter 11 petition in the US District Court for the Southern District of Texas — as one of its largest shareholders and clients, Regal’s parent, Cineworld, has filed a restructuring plan to emerge from bankruptcy itself.

Cineworld applied in September and hopes to be approved in late May. National Cinemadia’s actions should go faster because it is presented with a comprehensive restructuring agreement already in place and backed by secured lenders that it says provides a “clear roadmap…to emerge quickly without disrupting its operations or customer relationships”.

This step is not shocking. The company recently missed a grace period and then extended it several times on interest payments originally due in mid-February, already technically defaulting with major ratings agencies and fueling speculation about a possible Chapter 11 or out-of-court restructuring. Our auditor signaled concern about its viability last fall, and its share price has fallen at the level of cash equities. The business has taken time to recover from closed theaters during Covid and a slow box office recovery. Cineworld, as part of its bankruptcy, is trying to cancel or reset a long-term contract between National Cinemedia and Regal.

The agreement provides for the conversion of all the company’s debts into equity. Significant contracts will assume when Chapter 11 emerges, and existing management will be maintained to ensure continuity.

“Today’s transactions will enable us to deliver the strong results our advertisers and cinema partners expect today and in the future,” said CEO Tom Lesinski. “We are entering this process with overwhelming support from secured lenders and key stakeholders, which we expect will enable us to quickly and responsibly emerge as a stronger company.”

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Converting all of the company’s funded debt into equity would completely wipe out its balance sheet. NCM Holding Company will acquire an ownership stake in the restructured company of approximately 14%. Unless a formal creditors’ committee is formed, all unsecured public claimants will be paid in full in the regular session under the RSA. The Company will continue to operate with existing cash balances which provide liquidity.

After the restructuring, she said, “it will be well positioned as moviegoers enjoy resuming a regular schedule of major motion picture releases after the pandemic disruptions.”

In fact, the move comes as the box office hit a high point with last weekend’s release of super mario bros movie, Biggest opening weekend debut of the year.

The company has also filed a so-called day one order for approval, including requests for employee wage and benefits payments. It will continue to service existing client programs, partnerships, and cinema operator relationships in the normal course of business.

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