Regal Entertainment Group owner Cineworld Group PLC on Monday paid a disputed interest payment to investors that recently provided the movie-theater operator with a $450 million rescue loan, WSJ Pro Bankruptcy reported. The dispute stems from what Cineworld has said was a drafting error that resulted in a 1% Libor floor being included in the loan’s interest expense even though the movie-theater chain had originally intended the loan to have a 0% floor. If a loan has a 1% Libor floor it means that even if Libor — short for London interbank offered rate, a benchmark interest rate determined by an array of financial institutions — is below 1%, lenders are still paid the minimum 1% interest rate in addition to other interest included in their credit agreement. When Cineworld initially refused to pay the interest expense, the lenders said the company was obligated to because the final credit agreement all parties signed included the 1% floor. The company ultimately capitulated and paid the missing interest expense, amounting to several million dollars, after being informed that the lenders would freeze its access to the loan because it was in default.
