Judge Marvin Isgur on Wednesday told parties to the Cineworld bankruptcy that they need to speed things up as debtors and creditors hash out a restructuring plan for the giant movie chain, including closing theaters, wrapping up lease negotiations with landlords, and advancing an overall sale process.
“We are not going to stick around forever. The debtors need to be aggressive. I am not sitting here for a year, or for six months, to figure out what shops are closing. That is a process that is going to happen now,” said Isgur, a U.S. bankruptcy court judge for the Southern District of Texas, at a hearing today. Shops refers to theaters.
Cineworld filed for Chapter 11 in September.
“I have been very patient in this case [but] I want to see more action in terms of what this future company is going to look like. … We need to move on with life,” Isgur said.
Cineworld has closed 23 theaters since filing and reached new lease agreements with 25% of landlords — a percentage that clearly failed to impress Isgur.
Negotiations with other landlords on “the rest of the portfolio are well underway,” said the company’s Kirkland & Ellis bankruptcy attorney Josh Sussberg. “The management team has made it clear time and time again it is willing to close additional theaters absent landlord engagement [so] we encourage everyone to come together,” he said.
Cineworld on Tuesday said it would run a sale process focused on proposals for the group and talks with interested parties this month. The company also denied comments made by rival AMC Entertainment in a December regulatory filing that it had talked with Cineworld about acquiring some U.S. and European assets. AMC, in any case, said then that the talks were over.
The debtors said they are looking to present a restructuring plan at the end of February.
Also at the hearing, an update on the process thus far, Cineworld’s war of words continued with theatrical advertising agency National CineMedia, which is locked into a long-term contract with Regal, one of its three founders. Sussman called National CineMedia’s offering “outdated for the modern movie theater experience” and said Regal is currently in negotiations about a shift with several other potential partners. He said a change would save the movie chain $50 million a year.
An attorney for National CineMedia insisted at the hearing that the Regal contract is “not rejectable” even in bankruptcy.
Isgur wasn’t so sure, saying, “I would encourage you to come to a resolution with the debtor. I’m just trying to be blunt with you.”
Sussman, looking to set the scene for the judge, touted box office receipts for Avatar: The Way of Water and said the James Cameron blockbuster, along with titles like Top Gun: Maverick and Spider-Man: No Way Home, “demonstrates one of the key hypotheses of the debtor’s management team” — that blockbusters “will continue to generate high revenue and attendance for theaters. We just need more of them.”
He criticized critics who say Regal lags in recliners in its theaters, implying that was a conscious decision to retain the maximum number of seats available. “Having the most seats, and the best experience, is key.”
Isgur acknowledged the current complex and uncertain state of the exhibition industry but said he wants a restructuring plan that as much as possible “gets this right…gets the debt levels right, the footprint of locations right. To put the company on a path to success. We don’t want to take half measure here.”
“It looks like this industry, more than most, is in a state of major flux and [that] would have occurred at some point with or without Covid. And people need to figure out what is the future of the industry. Guesswork by very smart people who are good at guessing. And we are not going to be in a world of certainty in this case.”