13 novembre 2024

Cineworlds English restructuring plans

Briefing

On 1 October 2024, the English High court sanctioned the restructuring plans of four Cineworld group companies despite a late challenge by landlords.

Background

In 2023, four Cineworld companies agreed with two landlords (the Objectors) for a reduction in rent payments in return for promises that the leases would not be further amended in any future restructuring plans.

The companies' finances subsequently deteriorated, and they applied for restructuring plans which included the Objectors' leases.

The Objectors applied for injunctions to exclude the leases from the restructuring plans which were considered by the court within the "sanction" proceedings.

Decision

The court dismissed the injunctions and sanctioned the plans holding that:

Jurisdiction: The amendments to the leases are capable of being compromised under the plans.
Class composition: The Objectors should not be in a separate class as they would be in the same position as other landlord creditors if the companies entered insolvent administration.
Fairness and pari passu: Excluding the Objectors' leases from the plans would place them in a significantly better position and no good reason for this had been shown. This was not a case where differential treatment would promote the restructuring.
Timing: The Objectors had failed, without reasonable explanation, to raise the issue at the "convening" hearing.

Key takeaways

Promises made by companies not to include landlords (and other creditors) in future restructurings may not be upheld by the courts even where such agreements are entered into by the company in good faith but the company's financial position has since deteriorated.