It was touch and go for a while but a R250-million investment, the relaxation of lockdown restrictions and a line-up of blockbuster movies have helped Ster-Kinekor out of a tight financial corner.

Ster-Kinekor announced in a statement on Friday, 11 November, that it had successfully exited business rescue.

Stefan Smyth, Ster-Kinekor’s business rescue practitioner (BRP), said he had successfully concluded the business rescue process and the cinema group had returned to solvency, having raised R250-million from asset managers Blantyre Capital in the UK and Greenpoint Capital in South Africa.

The Ster-Kinekor board had resolved to enter business rescue in January 2021.

By August 2022, Ster-Kinekor appeared to be on route to achieving mission impossible, with Business Maverick reporting in DM168 that the ailing cinema group was buoyed by a string of hit movies, including Top Gun: Maverick (the first billion-dollar movie in Tom Cruise’s career), Minions’ spin-off Rise of Gru, Marvel Studios’ Thor: Love and Thunder, Baz Luhrman’s musical Elvis and Jurassic World: Dominion. 

Ster-Kinekor was forced into business rescue due to the fallout of the Covid pandemic, but things finally started looking up once audiences began returning to its outlets.

Smyth informed Ster-Kinekor creditors on 29 July that progress was being made in implementing his rescue plan and that there was sufficient liquidity in the business to continue trading. He believed there were reasonable prospects of rescuing the company.

Successful implementation of the plan, however, remained subject to various conditions, approval from the Competition Commission and the South African Reserve Bank as well as to the finalisation of agreements.

Once those conditions had been met, Smyth said, he expected dividend payments to creditors to be made shortly afterwards. July attendances, Smyth said, were looking good, boosted by Top Gun: Maverick and other hits, despite the escalating power crisis.

Ster-Kinekor launched a subscription club on 1 July, offering members options of either limited or unlimited movies a month, at a discounted fee. 

Smyth’s obligations included:

• The development of a detailed three-year financial model;
• Continued discussions with landlords on new lease arrangements;
• The finalisation of the newly opened flagship cinema at the V&A Waterfront in Cape Town; and
• The deciding matter of the group’s sale to Blantyre Capital and Green Point Capital, which submitted an offer to purchase in December 2021. 

That offer needed the approval of 75% of the creditors and shareholders. On 10 March 2022, most creditors voted in favour of the business rescue plan and sale. 

Blantyre and Green Point had proposed to fund Ster-Kinekor with a R250-million secured debt facility to enable its exit from business rescue and the partial refinancing of the group.  

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About 800 jobs saved

In his statement, Smyth said he had successfully concluded the business rescue process according to his plan. All necessary regulatory requirements for the transaction were fulfilled and lease agreements had been renegotiated.

“We are very pleased that we were able to raise the necessary capital to rescue Ster-Kinekor. Not only does this investment give the business a solid foundation on which to build its future, it has also meant that some 800 jobs have been retained and a dividend has been paid to creditors as proposed in the accepted plan. 

“Trade creditors will further benefit from ongoing trading with the company.” 

Smyth said the cinema group’s attendance, which picked up with the “stellar performance” of Top Gun: Maverick, is expected to continue to improve during the holidays, boosted by the new Avatar: The Way of Water and Black Panther 2. The new V&A 13-screen cinema in Cape Town is a hit with audiences.

“We thank all the Ster-Kinekor employees, creditors and relevant stakeholders and new shareholders whose efforts assisted us in exiting business rescue and creating a foundation for its future. Our thanks also goes to our loyal customer following and we look forward to entertaining you with new formats and great new content in the future,” Smyth said.

Founded in 1969, the company has dominated the market for years, with more than 60% of the cinemas in South Africa, 424 large-scale screens and 64,000 seats in 52 movie complexes.

It also has seven complexes in Namibia, Zambia and Zimbabwe.

Ster-Kinekor was also the first to launch dedicated art-house cinemas, in the form of  Cinema Nouveau, and the luxurious Cine Prestige theatres, which are pitched as a “business class” cinematic experience.

Before Covid, Ster-Kinekor was highly cash-generating and profitable, with good prospects. The lockdowns were almost the death of the company. BM/DM