National CineMedia Inc., the largest movie-theater advertising business in North America, is negotiating to hand control to senior lenders as part of a planned bankruptcy filing, people familiar with the matter said.
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.
Negotiations with creditors have focused on reaching a prearranged restructuring deal that could be implemented through chapter 11, the people familiar with the matter said. The company is expected to continue operating as usual.
National CineMedia, which sells advertising under long-term agreements with movie-theater operators, has been struggling since the Covid-19 pandemic forced theaters nationwide to close temporarily in 2020 and Hollywood studios shortened the exclusive window during which films are available only in theaters, or released movies directly to streaming platforms.
Law firm Gibson, Dunn & Crutcher LLP represents a group of senior lenders that also hold some of the company's unsecured bonds, people familiar with the matter said. White & Case LLP also represents some unsecured bondholders, the people said.
REGAL CINEMAS CLOSING 39 US MOVIE THEATERS FOLLOWING PARENT COMPANY CINEWORLD'S BANKRUPTCY FILING
National CineMedia has been locked in litigation with one of its largest customers, Cineworld Group PLC, the owner of Regal Cinemas. Cineworld, which is in bankruptcy, has asked for court approval to reject its contract with National CineMedia, saying either the terms need to be restructured or Cineworld will have to find a new screen-advertising provider or bring those services in-house.
National CineMedia has argued in court filings that Cineworld can't take any of those steps because it promised to make National CineMedia its exclusive advertising provider when it signed their contract in 2007.
While shares in National CineMedia trade publicly, major movie-theater chains own interests in its operating subsidiary, NCM LLC. As of September, Regal held a 23.6% stake in the subsidiary and Cinemark Holdings Inc. had a 25.4% stake.
