Relevant Documents:
Order (
Corrected Order /
Redline)
Judge Marvin Isgur granted the Cineworld Group debtors’ emergency
motion to exercise certain equity redemption rights in National CineMedia LLC, or NCM LLC, at a hearing this morning after resolving a
limited objection by NCM LLC and its publicly traded parent NCM Inc., and together with NCM LLC, NCM.
According to the debtors’ motion, the request arises in light of NCM LLC’s “burdensome debt load” and the potential that it will restructure in the near-term, resulting in cancellation of debt income that might flow up to Cineworld, as debtors Regal CineMedia Holdings LLC and Regal Cinemas Inc. own 23.7% of NCM LLC, an operating partnership in an “Up-C” structure. The debtors seek to exercise their right to redeem NCM LLC equity for either cash or equity in NCM Inc., resulting in some initial tax cost, but “significantly less than the tax cost associated with holding the interests in light of NCM LLC’s uncertain economic future,” according to the debtors’ motion.
CRO James Mesterharm testified today that the exercise of the redemption rights could result in ultimate tax savings of approximately $4 million to $5 million, according to analysis by the company and its professionals.
NCM’s objection was focused on seeking language in the order that the debtors indemnify NCM Inc. for any liability including defense costs that may result from the issuance of NCM Inc. shares to the debtors. Judge Isgur proposed, and the parties accepted, language clarifying that indemnification obligations, if any, would not be altered, reduced or enhanced by the order or NCM’s appearance on the matter. Except for this issue, the remainder of NCM’s objection was otherwise resolved through a
revised proposed order heading into today’s hearing, according to Ciara Foster of Kirkland & Ellis, counsel to the debtors.
Notwithstanding the debtors’ view that they do not owe indemnification obligations to NCM Inc. in a redemption scenario, Suzzanne Uhland of Latham & Watkins, on behalf of NCM, explained that NCM Inc. may be held secondarily liable by other parties for the issuance. In that situation, NCM Inc. would seek to assert common law indemnification rights. As a result, Uhland asked that the order clarify that “we’re not waiving any rights we may have under law or contract with respect to our indemnification.” As noted above, this request was resolved via the judge’s proposed language.
Editor’s note: This story has been updated to include a corrected order filed and entered after publication.