Cineworld Group Plc, Re

The court granted an administration order under Schedule B to the Insolvency Act 1986 and appointed the proposed administrators. The judge applied the jurisdictional tests in Schedule B para 11: the company is a company registered under the Companies Act 2006; it is more probable than not that the company is or will become unable to pay its debts; and the administration is reasonably likely to achieve one of the statutory purposes in Schedule B para 3. The court accepted that rescuing the company as a going concern (objective (a)) was not attainable without the agreed restructuring and that objective (b) — achieving a better result for creditors as a whole than a winding-up — was realistic given the confirmed US Chapter 11 Plan, the debtor-in-possession facility and the detailed analyses undertaken by AlixPartners. The court exercised its discretion to make the order, in particular because the Plan has overwhelming creditor support and had been carefully scrutinised and confirmed by the US Bankruptcy Court.

The court also considered SIP 16 reporting and the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021 and concluded the Regulations did not apply (and, if they did, the revised structure with NewCo 2 addressed the raised concerns). Procedural relief sought (abridgement of time and dispensing with certain notifications) was granted.

Background and parties. The directors of Cineworld Group plc (the Company) applied for an administration order and for appointment of three AlixPartners partners as administrators. The application was unopposed and was made in the context of a Chapter 11 restructuring of the Cineworld group in the United States. The US Chapter 11 Plan had been confirmed by the US Bankruptcy Court on 28 June 2023 but was conditional on the Company entering administration in England; if no administration order were made the global stay would be discharged and the Company would face liability for approximately US$3.376 billion (or become so liable on 7 September 2023).

Commercial and financial context. The Company's liquidity had been materially affected by the pandemic. Relevant indebtedness included a DIP facility of US$1.931 billion provided in Chapter 11, a disputed CAD$1.24 billion judgment (the 'Cineplex Judgment') and security over shares in Crown UK to secure legacy borrowings of US$3.939 billion. The Company had entered restructuring agreements with an ad hoc group of creditors (Restructuring Support Agreement and Backstop Commitment Agreement) providing for a debt-for-equity swap, equity injection by a NewCo (substituted to NewCo 2 in amended materials) and new facilities.

Nature of the application and issues for the court. The directors applied for an administration order under Schedule B to the Insolvency Act 1986, to appoint proposed administrators and for related procedural relief (dispense with notification to Barclays and the proposed administrators and abridge time for filing evidence). The court framed the issues as: standing to apply; whether the Company is or is likely to become unable to pay its debts (insolvency threshold); whether the administration is reasonably likely to achieve one of the statutory objectives in Schedule B para 3 (priority: rescue, better result for creditors, realise property); and the exercise of the court’s discretion, including whether the 2021 Regulations applied and whether SIP 16 disclosure was appropriate.

Court’s reasoning and findings. The judge found standing satisfied by a board resolution dated 27 July 2023. Applying the test cited from Re AA Mutual International Insurance Co Ltd, the court was satisfied that it was more probable than not that the Company was or would become unable to pay its debts imminently (the Company had only c. £676,000 in cash and significant imminent calls on guarantees and debt facilities). The court accepted evidence from the directors and the proposed administrators and accepted liquidation analyses showing unsecured creditors would receive no distribution in a liquidation. The court concluded objective (a) was not realistically achievable without the Plan and that objective (b) had a real prospect of being achieved through the proposed administration and implementation of the Plan.

The court exercised its discretion to make the administration order for reasons including the directors’ and proposed administrators’ views, the overwhelming support of creditors for the Plan and the degree of scrutiny the Plan had received from the US Bankruptcy Court. The court dealt with SIP 16 disclosure as appropriate and concluded the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021 were not engaged; in any event substituting NewCo 2 addressed the concerns raised. The requested abridgement and dispensing with service were ordered and the administration order was made in the form of the draft submitted.

First instance: the court made the administration order and appointed the proposed administrators. The judge concluded that jurisdictional requirements in Schedule B were met (company status, insolvency on the balance of probabilities, and the administration was reasonably likely to achieve a statutory purpose — primarily objective (b) to achieve a better result for creditors than winding up). The court exercised its discretion in favour of administration because the Plan had overwhelming creditor support, had been confirmed by the US Court, and the administrators’ and directors’ analyses showed a better outcome for creditors under administration than in liquidation.