North America’s largest cinema advertising company National CineMedia (NCM) is reportedly in negotiations to hand control to its senior lenders. The move would come before filing for Chapter 11 bankruptcy protection. The plan would be to have a pre-arranged restructuring deal, while the company continues to operate as normal.

The company, which owes roughly $1.1 billion in debt, is in an extended grace period after missing interest payments owed to its bondholders last month. It has hired law firm Latham & Watkins LLP as restructuring counsel, while its operating subsidiary National CineMedia LLC recently tapped lawyers from Paul Weiss Rifkind Wharton & Garrison LLP, according to people familiar with the matter. FTI Consulting Inc. is serving as restructuring adviser, while Lazard Ltd is the company’s investment banker, these people said.

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NCM was hit hard by the COVID-19 pandemic as it has long-term agreements with many of the largest cinema operators in the United States. With box office slow to recover, it means that the number of eyeballs that it has to guarantee to brand partners and clients have not materialised at multiplexes. To make matters worse, NCM is also locked in litigation with Cineworld-owner Regal, which is itself going through Chapter 11. Cineworld has asked that the Regal-NCM agreement be canceled so that it can be re-negotiated on more favourable terms (to Regal) or that it is free to go with another cinema advertising company.

NCM recently released a study commissioned with Lumen that advertising in cinema outperforms television and online by four to seven times. Sadly a dearth of blockbusters in 2022 means that there were too few hit movies for the adverts before them to significantly outperform other advertising-supported mediums.