Vue International is said to be close to an agreement that would see a significant proportion of its debt converted to an ownership stake by its largest credit holders. The third biggest cinema chain in the United Kingdom and Europe is said to be close to a GBP £1 billion (USD $1.182 billion) recapitalisation deal to achieve a stable financial footing and capital for the future. Vue has seen a strong recovery this year, but like many exhibitors around the world, is grappling with a financial hangover from pandemic.
The terms of the deal are said to involve the conversion of GBP £465 million (USD $548 million) of debt into equity. Current shareholders Alberta Investment Management Corporation (AIMCo) and Canadian pension funds Omers Private Equity, would give up their shareholding that they acquired in 2013. Vue has since expanded with acquisitions in The Netherlands and other European markets, though most recently it pulled out of a deal to buy Germany’s CineStar.
Vue was said to be exploring a sale or a stock market floatation in 2019, but the COVID-19 pandemic meant that the exhibitor instead had to focus on furlough of its staff, shutting down sites, securing deals with landlords and doing everything it could to stay solvent. Conditions had improved this year on the back of hits such as the latest Bond, Spider-Man and Top Gun films. “One source said that every one of its markets exceeded the three-year average for admissions in the last week,” according to Sky News, which broke the story of the debt-to-equity deal, “while it also marked the first time that Vue had recorded consecutive weeks over 1.8m customers since reopening.” Vue has seen an 18% increase in admissions in the last four week compared to the three-year average.
Vue currently operates 228 sites with almost 2,000 screens in UK, Poland, The Netherlands, Italy, Taiwan and elsewhere, employing over 8,000 people. It is the third largest operator in Europe after AMC/Odeon and Cineworld Cinemas. The deal is said not to affect landlords, suppliers or employees. In addition to his responsibilities of competently steering Vue through the pandemic as the company’s CEO, Tim Richards was also recently made Chairman of the British Film Institute (BFI). The deal is said to give Vue an additional GBP £75 million (USD $88.6 million) of liquidity for the near future.
Assuming the deal goes through it could create a template for other exhibition chains that have amassed significant debt before and/or during the pandemic mostly through closures and operational restrictions rather than mismanagement. What it will do for the confidence in the cinema sector of existing shareholders and investors in cinema operations remains to be seen. It is worth noting however, China recently saw a USD $450 million deal by the country’s third-largest cinema operator HG Entertainment to acquire the country’s seventh-largest operator.