Cineworld Term Lenders Seek to Preempt Potential Asset Transfer to Unsub to Secure New Financing in Letter to Company, Administrative Agent 

An ad hoc group of lenders to Cineworld’s $3.3 billion U.S. term loan due 2025 has sent a letter to the movie theater chain and term loan administrative agent Barclays indicating it would not support the company’s potential efforts to raise capital by transferring assets out of the restricted group to unrestricted subsidiaries, according to sources.

The lender group, represented by Arnold & Porter as legal advisor and Houlihan Lokey as financial advisor, laid out in the letter the legal arguments for why such a transaction would violate the credit agreement, including requirements for the company to be solvent at the time of such a transaction, the sources said.

The term loan was quoted today at 66.5/68.5, according to a trading desk.

The company said in September that it is in discussions with its revolving lenders to waive a 9x net leverage covenant test on Dec. 31 and a 5.5x net leverage covenant test on June 30, 2021. Cineworld also needs to comply with a $50 million minimum liquidity covenant if it draws on the incremental $110.8 million portion of the revolver. Cineworld reported $404.7 million of liquidity, including $285.7 million of cash, as of June 30.

Cineworld and Arnold & Porter did not immediately respond to requests for comment. A representative for Barclays declined to comment.

--Harvard Zhang