As the film sector experiences a boom with the launch of Harry Potter and the Philosopher’s Stone, some companies like Kinowelt, are in desperate need of a little magic to stay afloat.
Kinowelt Medien AG, a film distributor based in Munich, might have to file for insolvency. The company has a total of 797 employees throughout the Group. It specialises in the handling of licenses and the distribution of films throughout Germany. It also has one of the biggest German language film offerings internationally. The company is in hot water over a DM 100 million which it owes to Dutch bank ABN Amro Bank NV, based in Amsterdam.
Things have not been going well for the Bavarian company. It recently lost the distribution rights for Lord of the Rings in Germany. Now, ABN Amro Bank NV has called in its loans to the company with effect from 28th November 2001. The loans amount to more than DM 100 million, and Kinowelt is not in a position to raise the sum by the bank‘s deadline.
If it is not possible to reach an agreement with Amro Bank NV before then, Kinowelt will have to file for insolvency to protect its creditors. Kinowelt management is convinced that if this happens, the result for the funding banks will be significantly worse.
This step taken by ABN Amro Bank NV comes as a surprise for Kinowelt. In recent months the company had succeeded in tightening up its business operations and had achieved a very positive cash flow before interest and amortization.
All the funding banks had been informed of this development and many of them had reacted positively to the news. Some banks had already indicated their willingness to contribute towards funding restructuring measures. With the exception of ABN Amro Bank NV, none of the other banks have called in their loans.
ABN Amro Bank NV appears to expect to achieve a higher rate of repayment of its loan to Kinowelt through insolvency procedures. This opinion is not confirmed by experts consulted by Kinowelt.
On the contrary, a large proportion of the loan from ABN Amro Bank NV is not collateralized. The action taken by ABN Amro Bank NV contradicts all economic considerations.