European cinema giant Vue secures additional liquidity of 88 million US dollars

European cinema giant Vue will see its lenders fully take over the company in a £1 billion ($1.18 billion) takeover as the exhibitor strikes back in the wake of the pandemic.

Vue confirmed on Thursday that its senior lenders will take 100% stake in the company. The new deal will convert around £465 million ($548 million) of debt into equity. The recapitalization will help Vue raise £75 million of additional liquidity.

The deal sees Vue’s main backers, Alberta Investment Management Corporation (AIMCo) and Canadian pension fund Omers, divest their holdings nine years after it first took control of Vue for around £1billion in 2013. The company’s new backers are said to be financial investors and lenders other than banks or private equity.

“We do everything because we’re conservative as a company, and we want to make sure we don’t have problems going forward,” said Tim Richards, Vue’s CEO diversity. “We’ve seen the ups and downs and the lumps of the year and we were concerned about the liquidity that could happen in the fourth quarter of this year.”

Richards points out that Q4 appears to be “quiet” for releases ahead of James Cameron’s “Avatar 2” in December.

“We entered discussions with our lenders out of caution, and the deal now allows the company to deleverage and get back to where we were before,” added the executive, who is expected to remain CEO.

Vue’s recapitalization plan is expected to be completed later this year, and the company has said that “no landlords, suppliers or employees” will be affected by the deal.

Before the pandemic, Vue had seen its biggest trading period in the 12 months to the end of February 2020 with a profit of £150m and more than 100m visitors. However, during the COVID-19 crisis, the cinema chain had to close its more than 200 European cinemas in eight countries.

Richards said that Europe’s lockdowns during the COVID-19 crisis “presented a significant challenge for the company for 18 months”.

Post-pandemic, however, May’s attendance for Vue was 85% of its three-year average, with June’s attendance topping 100% of its three-year average, thanks to the success of Top Gun: Maverick.

“I’m delighted that viewers are now returning to pre-pandemic levels and I’m thrilled with the fantastic lineup of films coming out including the recent Top Gun film which resulted in admissions well ahead of our projections ‘ said Richards. “The market continues to recover from the pandemic and I welcome the constructive discussions we are having with investors and shareholders to create the right capital structure for the longevity and success of the business. I would also like to thank our shareholders, OMERS and AIMCo, for their support throughout this process.”

Vue currently operates 227 cinemas in 10 countries, including European markets such as the UK and Ireland, Denmark, Germany, Italy, Lithuania, the Netherlands and Poland, and Taiwan. The company is currently the third largest European exhibition chain behind Odeon by AMC Theaters (286 cinemas) and Cineworld (230 cinemas).