Cineworld - Case Update

The High Court has sanctioned Part 26A restructuring plans for four Cineworld entities, exercising its power to cram down landlords who argued that side letters entered into in 2023 meant they could not be bound by the plans.

The plan companies are the primary tenant entities within the UK group, which has in recent years engaged in attempts to negotiate consensual rent solutions with landlords. Before the group's emergence from its US Chapter 11 plan, management of the UK Group negotiated 18 consensual deals with landlords, which resulted in annual savings of approximately £4.9 million.

More recently, the plan companies also reached agreement with one landlord, Aviva Life & Pensions UK, in respect of three sites, as a result of which those leases were not included in the restructuring. A similar agreement was very recently reached with M&G.

Consensual agreements were reached with the objecting landlords in 2023 pursuant to which the landlords agreed to rent reductions in exchange for an agreement not to be included in a future restructuring plan or CVA. However, unlike the position with the recent deals with Aviva and M&G, the objecting landlords were included in the plans.

The Court sanctioned the plans in the face of their objections, finding that the negative covenants in the side letters were capable of being compromised as part of the plans. The Court also focussed on the purpose of a restructuring plan as a form of collective proceeding for the benefit of creditors as a whole, and stated that the Court will be slow to enforce agreements which operate to undermine the pari passu principle.

The objecting landlords have been granted leave to appeal on this issue.

Read the decision here.

Professionals involved: Tom Smith KC, Henry Phillips and Annabelle Wang (instructed by Kirkland and Ellis) for the plan companies; Ben Shaw KC (instructed by RLS Solicitors and Cripps) for the objecting landlords