Vue Cinemas have issued a powerful ultimatum to their landlords to accept a 2-3-year rental deferral in light of their situation due to the pandemic in 2020. Otherwise, they will press ahead with a Company Voluntary Agreement which we’ve seen engulf businesses in the past year in the UK.
We’ve reached out to Vue for comment but this story first broke in The Times who explained that a Landlord had gone on record to say: “They made it clear, that if they couldn’t get the necessary landlord approvals then they would explore the alternatives. The clear implication is that they would resort to a CVA”.
A CVA would most likely require the landlords to approve the deal regardless, as they are usually the biggest creditor when these agreements come to fruition. However, CVA’s take time to process, 75% of the creditors must agree to the proposal, but could leave the company without any lines of credit which could make it difficult to make payments should further trouble hit the company.
Landlords Will Want To Avoid A CVA
Movie delays and schedule changes are up in the air. But reducing wage cost – even in light of the furlough scheme – is a possibility. High paid executives/management teams can be cut. And an acceptance of a CVA agreement can allow the removal of employees – with no redundancy payments of lieu of notice costs (paid by the government).
A CVA was an option explored by Cineworld PLC before its recent cash injection, however sources tell us that’s also still in consideration as the company continues to battle billions in pounds of debt.
Warner’s Move Causes Further Pain
The latest news we broke yesterday of Warner Bros. Pictures utilising a streaming and cinema schedule for releases in 2021 doesn’t exactly help cinemas and could hinder further aid from investors and creditors who will want returns sooner rather than later.
Ultimately Vue has warned that it has a “significant doubt” on its ability to “trade” according to the Financial Times in light of recent restrictions and changes to the slate.
And it will certainly be interesting to see what happens: Will the landlords expect the demands when they are already feeling the pinch as a result of so many retailers avoiding rent payments and pushing for CVA’s themselves? Or will they force Vue’s hand into a CVA?
What do you make of this news? Are you worried about the future of Vue Cinemas in the UK? Let us know your thoughts in the comments below.
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