Cineworld incorrectly reported its largest shareholder

Cineworld incorrectly reported the identity of its largest shareholder in its most recent annual report, as the struggling cinema chain failed to keep track of changes to its complex ownership structure.

The world’s second-biggest cinema chain is on the verge of filing for Chapter 11 bankruptcy in the US, in an attempt to restructure its nearly $9bn in debt and lease liabilities.

Its largest shareholder is the family of Mooky and Israel Greidinger, the Israeli brothers who serve as the group’s chief executive and deputy chief executive, respectively.

In its 2021 annual report, Cineworld reported that 20.08 per cent of its shares are owned by Global City Holdings, a Dutch holding company ultimately owned by Greidinger family trusts.

A footnote explains that this entity holds 274.7mn shares, while a further 1mn are held by Global City Theatres, another Dutch entity that is described as “a wholly owned subsidiary of Global City Holdings”.

However, according to Global City Holdings’s 2020 audited annual accounts, it no longer owns Global City Theatres, which in fact owns almost all of the Greidingers’ stake in Cineworld.

Global City Holding sold Global City Theatres to an unnamed “related company” for €1. It recorded the disposal in 2020, although the accounts disclose that the “actual transfer of shares occurred in February 2021”.

After the sale, Global City Holdings held only 1mn shares, equating to just 0.07 per cent of Cineworld’s stock.

While the accounts did not name the company that took over Global City Theatres, Dutch corporate records show that it was DKG Park, another entity owned by Greidinger family trusts. The company is named after the initials of Mooky and Israel Greidinger’s parents — Dahlia and Kalman Greidinger — according to a person familiar with the matter.

Cineworld said: “Global City Theatres was and remains the registered owner of approximately 275mn (approximately 20 per cent) Cineworld shares. Global City Holdings was and remains the registered owner of 1mn Cineworld shares. The registered and total shareholding in Cineworld of the Greidinger family trusts remains 20.8 per cent and did not change in 2020 or 2021 — nor has it subsequently.”

The errors in Cineworld’s annual report underscore the complexity of the Greidinger family’s holding companies, which have raised substantial amounts of debt against their shares in the cinema chain, which are currently down more than 90 per cent this year.

Global City Holdings’ accounts show that it began 2020 with £595mn of debt “secured by Cineworld shares”.

In March 2020, the group replaced a £420mn margin loan with a smaller £210mn debt facility with “no margining provisions”, after selling a 7.9 per cent stake in the company for £116mn to repay some of this debt. The accounts also show that the group repaid an additional £117mn of debt in the first half of 2020.

In July 2020, Global City Holdings “breached certain financial covenants” on this debt facility and “did not pay” principal and interest that was due, prompting lenders to send a “reservation of rights letter” warning that they could take action against the borrower.

In September 2020, the Greidingers refinanced the loan with a new lender, while striking the deal to shift ownership of Global City Theatres to DKG Park. Cineworld has previously disclosed that the new lender was British hedge fund Sand Grove Capital Management, but has not disclosed the size of the loan.