Former Cathay cinema operator mm2 given nod by High Court to apply for four-month reprieve from creditors

SINGAPORE: Cinema operator mm2, which owes millions of dollars to creditors, was on Wednesday (Dec 10) given a nod by the High Court to apply for a four-month moratorium.

The Singapore company has faced repayment demands from landlords over the now-closed cinema chain Cathay Cineplexes.

With its financial woes, the chain ceased operations following a Sep 1 announcement that it would enter creditors’ voluntary liquidation.

A moratorium is an “extraordinary form of relief” that temporarily restrains the ordinary rights of creditors to pursue their claims. The company had applied for one on Nov 10. 

Judicial Commissioner Mohamed Faizal, in his judgment, said the granting of such relief must be “approached with care, transparency and a clear articulation of how it serves the broader public interest”.

He noted that the procedural requirements for such a moratorium have been satisfied in this case, including mm2 providing the necessary undertakings and compliance with advertising and notification requirements.

THE CASE

Listed company mm2 expanded into cinema operations in 2017 through the acquisition of Cathay Cineplexes’ operations for about S$230 million (US$178 million).

But as a result of the COVID-19 pandemic and “ever-evolving consumer preferences”, the company went into financial difficulties.

It has since faced a series of creditor demands and legal actions. Among the creditors is Linkwasha Holdings, which provided a S$30 million loan to mm2 in 2017 to partially finance the purchase of Cathay Cineplexes’ Singapore operations.

In November 2024, mm2 issued a promise to pay S$15 million to Linkwasha as a full and final settlement of the remaining outstanding amount arising from this loan.

Under the terms of the unsecured loan notes, mm2 is required to make an initial payment of S$7.5 million by Nov 8, 2024, as well as quarterly payments of S$250,000, plus interest.

The remaining and outstanding amount was then payable by Nov 30, 2025.

While mm2 was able to pay S$8.305 million in November 2024, it has since been able to only make a further payment of S$150,000. 

On Jul 7 this year, Linkwasha issued a statutory demand for S$7.35 million and S$200,500 in accrued interest. The entertainment company has been unable to meet this demand.

Mm2 is also facing other repayment demands, including S$74.6 million from UOB and S$2.6 million from Frasers.

The company said these demands have resulted in an “untenable situation where it faces imminent winding up proceedings if it is not provided the breathing space” that is provided by a moratorium.

Linkwasha objected to mm2’s application for a moratorium, saying the entertainment company has not provided enough details to allow the court or creditors to assess the application.

It said if the court were to grant a reprieve, it should only be “brief” and “accompanied by strict conditions”.

Other creditors were also in attendance at the court hearing, although they took no position and did not seek to make any submissions, Judicial Commissioner Faizal noted.

RESTRUCTURING

The former cinema operator is proposing a restructuring deal.

It intends to distribute S$12 million among creditors, which it estimates would result in them receiving about 28 cents on the dollar for their outstanding debt.

“This stands in contrast to a plain vanilla liquidation scenario, which the applicant estimates would result in unsecured creditors receiving between nil and S$0.0255 on the dollar,” said the judgment.

This recovery would be structured as about 18 per cent in cash payments and the remaining 82 per cent through the issuance of new shares in mm2.

The S$12 million distribution forms part of a larger proposed S$25 million investment that mm2 is apparently in negotiations with Hildrics Asia Growth Fund for. The remaining S$13 million would be utilised as working capital.

In its application, mm2 said it would pay in full the debts of creditors that are deemed necessary for their continued operations.

"Upon termination of the schemes, all claims against (mm2), including claims pursuant to corporate guarantees, would be deemed to be waived, released, discharged and extinguished," said the judgment. 

"Additionally, all creditors would be required to reassign and release to the applicant all rights, title and interest in any assets or property that had been assigned to or charged in favour of the creditor."

BROAD SUPPORT

The judicial commissioner said he was of the view that the application by mm2 has been “made in good faith” and there exists sufficient evidence of broad creditor support.

Linkwasha said there were insufficient details, including how the claim that 28 per cent of the debt owed to creditors was computed.

The judicial commissioner said these were not unfair questions, but added that to ask for full details at a preliminary stage could be seen as demanding the impossible.

“The (most important reason for) a moratorium in cases such as these is often to create the breathing space necessary for such a scheme to be refined and crystallised, free from the immediate pressure of creditors at the company’s neck,” he said. 

“A moratorium is, in some ways, the quiet harbour in which a distressed enterprise can seek to steady itself, take stock, and chart a course towards a fair and workable restructuring. 

“In that sense, it is invariably going to be the case that in many of these cases, any proposal that is expected to eventually be put before the creditors would still be in the process of being worked through.”

He said that although the proposal put forward by mm2 was “clearly missing some aspects”, as pointed out by Linkwasha, it was sufficiently detailed and “provided a fair insight” into how a restructuring would be able to yield greater collective benefit to the creditors than if mm2 were to be wound up.

The entertainment company has also provided sufficient evidence of creditor support, the judgment said.

Linkwasha said the evidence of creditor support is “poor” as only eight of the 20 largest unsecured creditors have come out to support the restructuring scheme.

But Judicial Commissioner Faizal disagreed with Linkwasha, and said that while the numbers were “not overwhelmingly positive”, they suggest that there is “sizeable support” for a moratorium.

“In my view, there is much by way of creditor support for one to remain positive about possible outcomes. 

“Even at this rather early stage, it would seem that creditors comprising over half of the unsecured debt have come out to explicitly support the request for a moratorium.

“Just as significantly, a fair number of these creditors have provided their support very recently only after the application had been filed.”

Linkwasha also asked the court for additional measures, including that mm2 provide updates on its negotiations with Hildrics, and that it provide more details to the creditors within two months.

The judicial commissioner said that while these were “reasonable and entirely understandable requests”, he did not grant these conditions as mm2 will in the coming weeks have to devote “somewhat finite bandwidth” to finalising the restructuring.

“In my mind, it may be imprudent to expect them to concurrently expend disproportionate energy on micromanaging the flow of interim communications and to move away from the need to show immediate progress almost from the get-go. 

“Transparency is important, but so too is focus,” he added.

He said that an enterprise should be allowed the space to properly develop a full restructuring proposal.

Mm2 said it was willing to meet Linkwasha's conditions "half way", in that it would provide updates to all creditors on its negotiations on a monthly basis, and it would furnish details of its proposal only within three months.

The judicial commissioner said the appropriate timeline for the second measure is somewhere between what Linkwasha was asking for and what mm2 was counterproposing.

The entertainment company was ordered to "flesh out" the details of the proposal by 4pm on Feb 27, 2026 – about two and a half months from Wednesday.