Finance for an Experiential Cinema

Fit Out Finance were pleased to provide lease finance for various equipment types in an ‘experiential cinema’.

The deal was far from straight-forward! Read on to find out why…

BACKGROUND:

We were approached by a long-standing contact – a consultant to the hospitality industry – with a mixed turnaround/growth project he was engaged with.

The business was an experiential cinema – an outdoor/big-top style set-up, where you can engage with the set and characters before you actually see the film.

You can also eat and drink there afterwards.

With one site running in London, they were looking to expand into further sites, starting with Manchester.

Whilst conventional multi-screen cinemas are in the doldrums, the art-house and experience sector is booming.

Naturally we were keen to take a look.

THE PROBLEM

Our introducer suggested that the customer had tried and failed to get finance elsewhere but hoped that we could assist.

Some quick research identified exactly why they had been unsuccessful using standard lenders as the business was:

• Loss-making.
• Heavily insolvent
• Carrying huge short-term debts.

Most credit-score/algorithm systems will decline a deal at that point.

A little more digging revealed that the business had been profitable prior to Covid lockdowns and, more significantly, had sold a 51% share to a huge US entertainment company.

This company was supporting them with short term loans as required and was leading a roll-out, initially into the UK but ultimately worldwide.

This went some way to clarifying the large debt.

There was a very clear and closely managed forward plan, which created significant economies of scale. The US parent was closely involved in most aspects of this.

For different reasons, neither the parent nor the UK Directors were willing to offer personal guarantees.

So, what we had was a prospect that was a basket case to credit score lenders, with significant strength behind the scenes, but no available secondary security, buying a mixed bag of equipment, specific to its own needs.

THE SOLUTION:

At Fit Out Finance we are no strangers to ‘intangible security’ – that is deals where there is strength which you can see and verify but can’t take security against.

Most of our lenders are receptive to a verifiable story, rather than just looking at the publicly available information.

We immediately set about putting together a detailed background and rationale for purchase, giving evidence of important details and events.

Based on this we found a lender who was comfortable with the future of the business, and that their parent would provide ongoing support as required.

We were able to provide lease finance for:

• Container storage.
• Walk-in fridge (outdoor).
• Furniture.
• Bar equipment.