Feb 2, 2021
Cineworld backs down in dispute with lenders over interest bill
Cineworld has backed down in a bizarre spat with its lenders over a disputed interest bill, after the London-listed cinema operator initially refused to pay additional costs ostensibly stemming from an error in its loan documents. The company, which has recently drawn scrutiny for approving a £65m executive bonus scheme, had clashed with lenders over a small increase in the interest rate on billions of dollars worth of loans, which Cineworld and its advisers said had been unintentionally increased during negotiations with creditors in November. While Cineworld refused to pay the additional interest when it first became due in December, it has now been settled, according to two people familiar with the matter. During negotiations for a $450m rescue loan in November, lenders were granted an interest rate increase on the group's existing debt of more than $3bn. This was because a so-called Libor floor, setting the floating interest reference rate at a minimum of 1 per cent a year, was inserted into the loan agreement. "It's quite simple: they signed the loan document, so they're liable for the interest," said one of the company's lenders, who added that Cineworld would have found itself in default on the loan if it had continued to hold out.
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