Cineworld shareholders objecting to the Restructuring Plan

Cineworld Individual Shareholders Group has filed a motion to oppose the Restructuring Plan proposed by Cineworld and its Creditors under the Chapter 11 Bankruptcy Case.

The text of the opposition motion below:

OBJECTION TO DEBTORS JOINT CHAPTER 11 PLAN OF REORGANIZATION OF
CINEWORLD GROUP PLC AND ITS DEBTOR SUBSIDIARIES

A Group of Individual Shareholders of Cineworld Plc., collectively owning more than 7% of the company's free float stock, represented by Ionut-Lucian Grama and Kamal Tiwari (the Individual Shareholders Group), hereby submit this objection (the "Objection") to Debtors' Joint Chapter 11 Plan Of Reorganization Of Cineworld Group Plc And Its Debtor Subsidiaries (the Plan).

BACKGROUND
The Debtors submitted the Plan in an inexplicably expeditious manner, omitting what we consider to be fundamental, and critical pre-requisites to such submission.

Firstly, since the Plan is centred on a complete restructuring of ownership and on financial recoveries, such Plan submission needs to be preceded by a factual, referential, clear and forward-looking valuation of the company, executed by an expert valuator named by the Court. Such a valuation never took place, or if it did, it happened behind closed doors and was never brought forward to the attention of the Court and other involved parties, except those parties which have collectively agreed and submitted the Plan. Such a valuation should have constituted the basis for any calculations, references or determinations included in the Plan. Instead, what we have is a vicious circle, where the same parties that structure and submit the Plan are the ones mainly benefiting from it. Restructuring and recoveries should have a precise, scientific determination, based on the value of the company to be restructured, and not be arbitrarily determined and agreed by the group of parties submitting the Plan. One or more parties cannot decide on actions like, for instance, swapping a certain amount of debt for equity, or direct equity allocation, or rights offering, before determining the value of the company as the supreme reference for any such actions. Otherwise, without such an expertise used as a reference, the entire process becomes subjective, one-sided, and potentially flawed. Given the extraordinary circumstances of the cinema industry over the last 2 years, any such valuation would need to be fully aligned with the box-office evolution and forecasts, rather than on the current financial indices and ratios of the company. A quick look at the year-to-date box office will show that it is getting very close to where it used to be before the pandemic, and when the value of Cineworld was in excess of 11 billion dollars. Now, the company is about to be "transacted" for a mere half of that value.

Secondly, we feel that during the preparation and submission of the Plan, the Debtors, and particularly the Board of Directors of Cineworld Plc. (BOD), did not observe their mandate which should be centred on the interests of the company's shareholders. We did not take notice of any opposition to the intentions of the secured lenders to take over the company at a deeply discounted value and completely disregarding the rights of other stakeholders deriving from such debatable value. More notably, and in an unusual antagonism with their expected natural position, the Debtors have obviously cooperated with the Creditors in structuring a Plan that would actually move the company ownership from the Shareholders to the Creditors. This is also extremely paradoxical and contrarian to the fact that the Greidinger brothers themselves own - directly or through various vehicles - a large stake in Cineworld Plc., and the Plan - as it has been currently submitted - is apparently undermining their own interests and eliminating any recoveries they may themselves be entitled to. This apparent paradox and mystery are elucidated when we get to that part of the Plan, where 7.5% of the shares in the Restructured Cineworld are put aside as a "Management Incentive Plan", for the benefit of the "future managing team" of the restructured company. It is only then when we can start to understand the reasons behind the complete lack of any opposition from the BOD and the lack of any other alternatives being considered: they have been taken partners to the future company, being in alliance, partnership or, if we are not shy to call it as we see it, being in cahoots with the Creditors for the construction of what is an obvious value-disregarding, value-destroying transaction.

Thirdly, this year the BOD of Cineworld has deliberately restrained the release of the 2022 financial results to the investors and to the wider public. This is very atypical, considering that in each of the previous years the financial results were released during the month of March. Corelated with the considerations and the line of thought of the above paragraph, we feel that the BOD decided to conceal what is most probably a significantly improved and encouraging set of financial results, until after the Plan is approved, so that they can paint a bleak picture of the health of the business and undervalue it to facilitate the significant discounted value included as an assumption in the Plan. Obviously, the releasing of very strong results for 2022 - particularly revenue, liquidity and cashflow ratios - would hinder their intentions and would challenge the remarkable undervaluation taken as a reference while constructing the Plan.

CONCLUSION
I. For the foregoing reasons and considerations, our Individual Shareholders Group respectfully requests that the Court rejects the Plan, or alternatively sends it back for a fundamental reworking, with respect to:

1. A mandatory forward-looking valuation of the company to be executed by an independent valuation expert. The so determined business value to be used as reference and denominator for the revised Plan.
2. In the same spirit of transparency and critical need for objective determinations, the Plan should include a full disclosure of the 2022 business results, including revenue, debt, assets, liabilities and cashflow. The Debtors have so far held back the financial results, although these are long overdue and essential to the assessment of the company financial status while constructing and submitting any restructuring plan.
3. The individual shareholders to be given the same recoveries and participation rights as the Greidinger shareholders have indirectly been given, i.e. currently sitting at 7.5% of the Restructured Cineworld stock.
4. In any case, the shareholders' interests to be included and considered in the Plan, and a certain minimal portion of the value determined under point 1 above to be allocated for shareholders recoveries.

II. We respectfully request that the Court also analyses the alternative of a Plan where the existing Debt is restructured and rescheduled, allowing the company to rebalance its free cash flow to the point of being able to repay debt, pay salaries, continue operations, and keep the current ownership structure unaltered. Given the evolution of box office and the global market share of Cineworld, this cashflow breakeven should be reached quickly and easily. The Courts is kindly requested to bear in mind that while the Creditors have invested funds under the form of Debt, the individual shareholders have equally invested their funds as Equity, last of the investment waves being done during the pandemic, when the company needed us the most. We should not be completely eliminated, set aside and forgotten, as this is not only utterly unfair but is also setting a very unfortunate and ugly reference and precedent with regards to individual shareholders rights and treatment.

III. We respectfully request the Court to support our Group by providing a Court-appointed legal representation which would be funded through the bankruptcy estate / DIP financing. As you can imagine, it is virtually impossible for us to consolidate financially or juridically in order to have a voice and a proper representation in the proceedings.

Dated: April 23, 2023

Cineworld Individual Shareholders Group

Address: Erou Iancu Nicolae 82C, Voluntari, Ilfov, Romania, 077190
Presscontact: Ionut Grama, info@cineworld-shareholders.com, 0040723629905

A Group of Individual Shareholders of Cineworld Plc., collectively owning more than 7% of the company's free float stock

This release was published on openPR.