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Cineworld Bankruptcy Judge Dangles 20% Yield on Fresh Cash

·2 min read

(Bloomberg) -- A federal judge offered a guaranteed yield of more than 20% to lenders willing to advance more cash to now-bankrupt Cineworld Group Plc.

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US Bankruptcy Judge Marvin Isgur dangled the yield in the theater chain’s first Chapter 11 hearing Thursday after insisting on major revisions to a crucial bankruptcy financing package. He took issue with the original $1.94 billion loan proposal because it would have mostly been used to repay old debt.

But with only $4 million of cash on hand as of Thursday, Cineworld desperately needs more money to stay afloat. Isgur promised investors the juicy return, which is similar to what they would’ve earned get under the earlier proposal, on cash advanced to fund Cineworld’s operations.

A group of lenders including Blackstone Alternative Credit Advisors, Cyrus Capital Partners and Credit Suisse Asset Management ultimately agreed to tweak the financing package to delay the repayment of $1 billion in old debt until Oct. 31, giving other Cineworld stakeholders a chance to evaluate the financing and search for a better deal.

“It’s a very good deal and it’s within the authority I have,” Isgur said earlier in the hearing, held by video conference. “I want to save the debtor, and I want to do it in a way that’s following the law.”

They lenders that have promised to give Cineworld new funds -- about $500 million of which will immediately bolster the company’s cash coffers -- are part of a group that holds most, but not all, of Cineworld’s most senior debt. Other senior lenders will get the chance to take part in the financing, according to court papers.

Isgur signed an order approving the amended financing package late Thursday night in Texas.

The case is Cineworld Group plc and Great Escape Theatres LLC, 22-90168, U.S. Bankruptcy Court for the Southern District of Texas (Houston).

(Updates with details from hearing throughout.)

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