A debt restructuring at Europe’s largest movie theatre chain is wiping out the investments made by its owners, two of Canada’s largest pension funds.
Battered by pandemic-related physical distancing rules that depressed ticket sales, United Kingdom-based Vue International Bidco PLC said its debtholders will get 100 per cent of the company in a recapitalization. Ontario Municipal Employees Retirement System (OMERS) and Alberta Investment Management Co. (AIMCo) will see their shares cancelled as part of the deal.
OMERS and AIMCo originally bought Vue in 2013, in a deal valued at £935-million ($1.48-billion), including debt. A decade after its 2003 founding, Vue had 1,321 screens across nine countries, including the U.K., Ireland, Germany, Denmark, Portugal and Poland.
OMERS spokesperson Neil Hrab and AIMCo spokesperson Dénes Németh both declined to comment Thursday on the restructuring.
Canadian pension plans had a number of investments in businesses that took big hits during the pandemic, such as airports, cruise lines and retail real estate. In some cases, such as with investments in malls, pension funds divested. In others, such as with investments in airports, the funds held on for a recovery.
The Vue bankruptcy is a marked failure that reflects the long slog of the movie theatre business. Shares of Cineplex Inc., Canada’s leading movie exhibitor, trade today for less than one-third of their prepandemic value.
In a news release at the time of the pension funds’ 2013 purchase, Vue said it “perfectly fit the selective acquisition criteria” of the two Canadian buyers, as it was a leading market operator with a diversified geographic footprint and a platform for more acquisitions.
Under their ownership, the company kept buying theatre chains and opening new locations. It now has just under 2,000 screens. The 12 months ending Feb. 28, 2020, was the best year in the company’s history, with more than 100 million admissions. Its EBITDA – or earnings before interest, taxes, depreciation and amortization – was £150-million.
“The lockdowns across our European estate caused a significant challenge for the business for 18 months,” chief executive and founder Tim Richards said in a statement Thursday.
The company’s mid-year 2021 update, the most recent on its website, reported a year-over-year 96-per-cent drop in admissions, a 78-per-cent drop in revenue and negative EBITDA.
“The market continues to recover postpandemic and I am pleased with the constructive conversations that we are having with investors and shareholders to put in place the right capital structure for the longevity and success of the business,” Mr. Richards said. “I would also like to thank our shareholders, OMERS and AIMCo, for their support through this process.”
Vue said admissions in May were 85 per cent of the company’s three-year monthly average. June admissions exceeded 100 per cent of the three-year average, driven by Top Gun: Maverick. Two of the top three biggest films in U.K. history have debuted in the past 10 months: Spider-Man: No Way Home and the latest James Bond film, No Time to Die.
The restructuring will see £465-million of existing debt removed from Vue’s balance sheet, and holders of the company’s first-lien notes will take 100-per-cent equity ownership of the new company. Vue had £775-million in first-lien debt, as well as a second-lien debt facility that it didn’t quantify.
The Financial Times, citing two people briefed on the deal, said U.S. asset manager Barings LLC will be the biggest single shareholder after the restructuring, with U.S. hedge fund Farallon Capital Management LLC, Invesco Ltd., PGIM Inc. and Lord, Abbett & Co. LLC also part of the ownership group.
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