National CineMedia Amended Plan, DS Includes Projections, $470M Going Concern Valuation; More Than Half of Secured Debt Claims Now Counted as Unsecured Deficiency Claims

Relevant Documents:
First Amended Plan
Amended Disclosure Statement
Redlines
Proposed DS Order / Redline

National CineMedia filed a first amended plan, disclosure statement and conditional DS approval order early this morning, with accompanying redlines against the prior versions. The new documents include a liquidation analysis, valuation analysis and financial projections, all of which were not disclosed previously. The plan’s classification scheme and class treatment remain almost entirely unchanged.

The debtor states that the plan is now supported by 64% of unsecured funded debt claims. To accomplish this, the debtors are classifying more than half of all secured debt claims (79% of which previously supported, and continue to support, the plan) as undersecured deficiency claims using an estimated enterprise valuation of $471.3 million, and including the remainder of the secured claims (approximately $486.3 million) in the total amount of allowed unsecured funded debt claims (classified as general unsecured claims in Class 4 under the plan).

According to the valuation analysis performed by Lazard, the debtor’s investment banker, the consolidated enterprise going concern value is estimated to be approximately $405 million to $530 million with a midpoint value of approximately $470 million as of the anticipated effective date of Aug. 17. The analysis says that based upon that valuation, the estimated cash at emergence, estimated minimum cash needs and estimated debt financing at emergence, the imputed range of equity value is estimated to be approximately $396 million to $521 million, with a selected midpoint value of approximately $461 million.

Based on the valuation, the DS now provides projected recoveries, with holders of secured debt claims slated to recover 42.7% of their combined secured and unsecured deficiency claims. The allowed amount of Class 4 GUCs is $729.8 million, with a projected recovery of 0.03%.

The vast bulk of Class 4 GUCs comprise “unsecured funded debt claims,” which total approximately $729.3 million in the aggregate ($486.3 million in secured creditor deficiency claims and $243 million in unsecured note claims, in each instance plus fees, accrued interest and similar amounts).

The filings also reflect the agreement in principle reached with Cineworld relating to the advertising agreement with Regal, without providing any additional details on the terms. The settlement remains subject to documentation and approval by the bankruptcy courts, nondebtor parent NCMI and the consenting stakeholders under the restructuring support agreement.

Liquidation Analysis

The debtor’s liquidation analysis shows that in a liquidation scenario, the estimated available distributable proceeds would be approximately $86.1 million on the low end, and $99.6 million on the high end. As a result, secured claims would recover between 9% and 10.4%, with no value to be distributed to other creditors or administrative claims.
 
Financial Projections

The financial projections are based on an assumed emergence date of June 30, and the post-emergence balance sheet was prepared using certain financial projections as of Dec. 28, 2022. The debtor assumes $10 million will be drawn on its exit ABL facility on the emergence date and fully repaid prior to year-end 2023.

The debtor projects steadily growing net income between fiscal year 2023 and 2027, ranging from $6.7 million in the second half of 2023 to $50.4 million in 2027. Revenue will also steadily increase, with $134.5 million projected for the second half of fiscal 2023 and $355.1 million for fiscal 2027.
The debtor projects total assets of $867.7 million by fiscal year 2027, including $276.4 million of cash and cash equivalents (as further detailed below). Liabilities will peak in fiscal 2027 at $76.8 million, but remain relatively flat from fiscal 2023.
   

Valuation Analysis

According to the valuation analysis performed by Lazard, the consolidated enterprise going concern value is estimated to be approximately $405 million to $530 million with a selected midpoint value of approximately $470 million. The analysis says that based upon the assumed range of enterprise value as of the assumed effective date of Aug. 17, the estimated cash at emergence and the estimated minimum cash needs and estimated debt financing at emergence, the imputed range of equity value is estimated to be approximately $396 million to $521 million, with a selected midpoint value of approximately $461 million.

Treatment/Recovery

The debtor’s plan sets forth the following classification of and proposed distributions to holders of allowed claims and interests (with changes in bold):

• Class 1 - Other secured claims: On the effective date, each holder of an other secured claim would receive either payment in full in cash, the collateral securing its claim, reinstatement of its claim or such other treatment rendering its claim unimpaired.
  • Projected amount: “N/A”
  • Projected recovery: 100%
     
• Class 2 - Other priority claims: On the effective date or as soon as reasonably practicable thereafter, each holder of an other priority claim would receive payment in full in cash or other treatment consistent with section 1129(a)(9) of the Bankruptcy Code.
  • Projected amount: “N/A”
  • Projected recovery: 100%
     
• Class 3 - Secured debt claims: Holders of secured debt claims would receive a pro rata share of 100% of reorganized equity, subject to:
  • Dilution by the management incentive plan (up to 10% of reorganized equity) and any reorganized equity issued after the effective date to ESA counterparties pursuant to the 2007 Common Unit Adjustment Agreement;
  • The proposed reallocation of 11.5% of such reorganized equity to NCMI pursuant to the NCMI settlement; and
  • The “Structuring Considerations” in Article 4.3.1 of the plan, which include:
    • The holders’ option to elect to have their reorganized equity immediately redeemed in exchange for NCMI stock, provided that all holders (other than NCMI) would “be deemed to have made an NCMI Election unless otherwise indicated in a notice to the Debtor and NCMI.”
    • The holders’ option to transfer their secured debt claims to one or more newly formed entities prior to or on the effective date, which entities shall be treated as holders of secured debt claims for all purposes of the plan; and
    • Holders of equity in blocker entities’ option to require that any such blocker entities be merged with or acquired by NCMI or an affiliate, such that the holders receive shares of NCMI common stock of an amount equivalent to the number of new NCM common units owned by such blocker entity as of the date of such merger or acquisition.
  • Projected amount: “$957.6 million”
  • Projected recovery: “42.7%”
     
• Class 4 - General unsecured claims: Holders of general unsecured claims, including unsecured funded debt claims, would receive a pro rata share of the $250,000 GUC cash pool.
  • Projected amount: “$729.8 million”
  • Projected recovery: “0.03%”
     
• Class 5 - General unsecured convenience claims: Holders of general unsecured claims for less than $2,500 would be paid in full in cash on the effective date or the date due in the ordinary course of business.
  • Projected amount: “approximately $48,000“
  • Projected recovery: 100%
  • Unimpaired; deemed to accept.
     
• Class 6 - Section 510(b) claims: Holders of section 510(b) securities claims would receive no recovery and their claims would be canceled, released, extinguished and discharged.
  • Voting status: Impaired; deemed to reject.
     
• Class 7 - Existing NCM interests: Holders of existing NCM common units would receive no recovery and their interests would be canceled.
  • Voting status: Impaired; deemed to reject.

Editors' Note: This story was updated to clarify our description of projected growth to reflect that the company's starting numbers are for the second half of 2023, not full year 2023.