Peter Giles and Paul Briggs, who joined Ware, U.K.-headquartered Cintel International Limited in January as investors/managers, have entered into a deal to buy the company’s business and assets, as well as shares in telecine CRT supplier Brimar Limited, Middleton, U.K, for $11.3 million (translated from British pounds). Giles and Briggs reached the acquisition agreement with Cintel International’s receiver—international auditing firm KPMG—and Image Precision International (IPI). Middleton-headquartered IPI is parent company to Cintel and Brimar.
Per the arrangement, the business and assets of Cintel will be transferred to a new company, Cintel Limited. Legal contracts finalizing the transaction are expected to be signed by month’s end. Giles and Briggs will serve, respectively, as executive chairman and group operations director of Cintel Limited.
The North American operation, Cintel Inc., becomes a wholly owned subsidiary of Cintel Limited. Cintel Inc. has three offices in the U.S.: its headquarters in Valencia, Calif., an office in Chestnut Ridge, N.Y., and a service operation in Chicago, all of which continued to operate as a going concern during the receivership period. Brimar was also unaffected by Cintel International’s being put into receivership.
As earlier reported (SHOOT, 8/11, p. 1), the Cintel International board invited its major creditor, the Bank of Scotland, to appoint KPMG as a receiver on July 21. Cintel International was in a U.K. receivership insolvency process that parallels a situation sitting somewhere between Chapters 7 and 11 of U.S. bankruptcy law, with KPMG given the responsibility of realizing as much value for the assets of the company as possible. The move followed a major restructuring plan put in place in May, which saw the U.K. operation scaled back from 145 staff members to 60, and U.S. staffers reduced from 30 to 21. In July, the U.S. contingent was further whittled down to 10 staffers.
Cintel and Brimar were purchased by IPI in 1997 under a management buyout from Manchester, U.K.-based Schroder Ventures. However, an overvaluation of Cintel’s worth, coupled with a downturn in the market, resulted in the company experiencing financial difficulties.
Giles and Briggs formed one of several teams that were bidding for the assets of Cintel.
Giles told SHOOT that it was a smooth deal in the face of tough competition. Now Cintel Limited is a new company with the funding necessary to keep the business going and to maintain a strong balance sheet, he contended.
"When Cintel went into receivership, there was total debt of approximately 27.5 million pounds (U.S.—$39 million). In a receivership, what, in effect, happens is that the debt remains with the old companies. So the very substantial amount of debt that existed in both Cintel and IPI has remained with them and will not be assumed by the new company," explained Giles.
"We paid eight million pounds (U.S.—$11.3 million) for the new company. … The major creditor, the Bank of Scotland, will receive a substantial dividend based on the proceeds of the sale, together with anything they realize on the other assets, primarily the properties. However, there will be no surplus for the unsecured creditors of Cintel."
Giles does not expect that the new Cintel will suffer because of the outstanding amounts. "The unsecured creditors include a variety of trade suppliers who have worked with Cintel over the years, and I think most of them have taken the view that they have had an extremely good long-term relationship with Cintel and have recognized the difficulties that Cintel has experienced," he said. "Considerable efforts were made to improve their position and additional funds had been poured into the company, but there came a point when it was necessary to do a complete re-establishment of the business," he added.
Regarding any possible effect on the U.S. operation, Giles noted that most of the significant changes stateside were implemented when the company underwent the aforementioned major restructuring in May and July. "As far as the U.S. operation is concerned, we have already downsized and we are most definitely wishing to maintain a strong presence in New York and in Los Angeles," stated Giles. Don Edmonson, who continues as president/COO of the North American operations, could not be reached for comment at press time.
Staff at the new Cintel will number 66 people in the U.K. and approximately 14 in the U.S., according to Giles. Annual revenue forecasts for Cintel and Brimar are at about $28 million; Cintel is expected to generate approximately $14 million to $17 million of that total.
Telecine equipment will remain the primary focus of Cintel; product offerings will continue to revolve around the high-end, HD capable C-Reality telecine; the URSA Callisto, which adds HD capabilities to Cintel’s URSA Gold and Diamond lines; and RASCAL, an entry-level SD/HD machine.
Stateside, 18 C-Realitys and one Callisto are currently in the marketplace, and demand for the RASCAL is escalating, according to Giles, who said he was overwhelmed by the expressions of support from customers and suppliers over the past two months. This has been reflected in the number of orders taken, despite the uncertainties of receivership. "I think that most people have been eager to see Cintel survive and continue, as they see it as an important part of the postproduction industry," he related.
One of the companies that gave Cintel a vote of confidence during the receivership period was Manhattan Transfer, which maintains facilities in New York and Miami. Manhattan Transfer, New York, took delivery of a Callisto in July and a C-Reality several weeks ago.
Dan Rosen, president of Manhattan Transfer, was pleased to hear that Giles and Briggs had purchased Cintel. "We have a long track record with Cintel and have been confident from the beginning that the company would continue; we have taken delivery of the new systems and are very happy with them," Rosen reported.
The new Cintel was showcased at the International Broadcasting Convention in Amsterdam earlier this month, with announcements centering around new features on existing products. The RASCAL has been upgraded and some of the functions that were previously options have been added as standards. Consequently, $105,000 has been added to the original price tag, making the new shipping price around $660,000.
The U.S. will continue to be a significant market for Cintel. "I think the question over the direction of HDTV has caused quite a significant pause in the U.S. market over the past 12 months, but happily we’re doing quite well in the rest of the world," said Giles. "Historically the U.S. market has been something approaching 50 percent of our business, but it has been less than that over the past 12 months. I expect that to be resolved, and we can see it rolling in at around 40 to 50 percent of our business on a continuing basis."
