Standing Tall When It Matters Most

Bankruptcy judge approves theater lease rejections

A bankruptcy judge has ruled that Cineworld Group can walk away from commercial real estate leases it signed when business was booming and involving 17 underperforming movie theaters. The ruling was handed down in the U.S. Bankruptcy Court for the Southern District of Texas on Oct. 21. CineWorld Group, which is a U.K.-based entertainment company that owns Regal Cinemas in the United States, filed a Chapter 11 bankruptcy petition in September 2022. The company plans to make its way back to profitability by scaling back operations and closing unprofitable theaters. Regal Cinema locations in Houston, Austin and Amarillo are among the theaters slated for closure.

No objections

The judge did not hear arguments before handing down his ruling because attorneys representing the landlords involved did not object to the lease rejections. According to court papers, the 17 theaters earmarked for closure were chosen because their locations were considered “unnecessary” and their leases were considered “burdensome.” The fates of nine other properties will be determined at a hearing that has yet to be scheduled. The landlords of those theaters have raised objections and want Cineworld Group to honor its commitments.

New opportunities

The theater landlords that did not raise objections may have determined that cutting ties and pursuing new opportunities was preferable to becoming entangled in a business bankruptcy. Commercial construction has slowed considerably in recent years, which has opened up new opportunities for movie theater landlords. A closed Regal Cinema in South Carolina was demolished to make way for an apartment building, but other Regal locations have been turned into offices and corporate learning centers. In Arizona, state officials approved the conversion of a shuttered multiplex cinema into an impressive Department of Motor Vehicles facility.

Making prudent financial decisions

This Chapter 11 case shows that bankruptcy proceedings are not always contentious. When economic conditions change and companies find it impossible to meet their financial obligations, the Chapter 11 process gives them time to reorganize and streamline their operations. This helps companies to survive, and it also ensures that creditors receive the best deal possible.