SPAIN – Mercapital attempts turnaround for Abaco

The company, which voluntarily entered into a receivership process last week, is currently awaiting a court’s decision to allow the restructuring. This follows a feasibility plan previously designed by KPMG, which had attempted to revert the situation by resorting to additional credit, a refinancing, as well as the disposal of non-core assets, according to local press speculation.

Abaco has followed the negative trend of the Spanish cinema sector, which registered an audience decline of 10.7% in 2005, 5.3% in 2006 and around 10% in the first semester of 2007, according to data from the Spanish Ministry of Culture. The decline of cinema audiences in Spain is in contrast to other European markets such as the UK, which has registered a yearly increase of around 6%. This is due to factors including low attendance rates for domestic films (-42% in comparison to the first half of 2006) and the increasing penetration of piracy in Spain (highest penetration rate in Western Europe, with 132 millions of movies illegally downloaded in 2006).

The cinema group, acquired by Mercapital in 2005, purchased rival Cinebox last year, paying cEUR 60m in enterprise value to create the country's largest chain. Currently, Abaco has 42 multiplexes in Spain under management and around 1,200 staff. According to its private equity-backers, there are no immediate intentions to dispose of the company, which still sustains a positive EBITDA and is on target to get back on track. In the meantime, it's “business as usual” at the exhibitor: new movies have been included in the programme today and staff will continue to be paid. The continuity of the original business plan and any further development plans, however, are dependent on the restructuring of the debt, which was provided by a pool of local banks.

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