Cineworld reaches restructuring deal with lenders
Cineworld shares plummet as troubled group targets £1.8bn fundraising in bid to drag itself out of bankruptcy
- Cineworld filed for Chapter 11 protection in the United States last September
- The company’s debts soared following its £2.7 billion acquisition of Regal Cinemas in 2018
- Covid-19 compounded the problems as lockdowns led to cinemas temporarily closing
Controversial cinema chain Cineworld is trying to raise around £1.8bn from investors as part of efforts to emerge from bankruptcy.
The world’s second-largest movie theater chain filed for Chapter 11 protection in the US last September, allowing it to continue operations while working with creditors on a rescue plan.
Cineworld told investors on Monday it had agreed a restructuring deal, with the lenders offering £1.2bn of new debt financing and the group raising £651m through an equity offering.
Troubled times: Cineworld filed for Chapter 11 protection in the United States last September, allowing it to continue operations while working with creditors on a rescue plan
If implemented, it hopes to reduce the $5 billion mountain of debt by about 90 percent and fund future business activities.
Cineworld has also tried to sell its US, UK and Ireland operations but has struggled to find a buyer, though talks of unloading divisions in other countries continue.
Sky News reported last week that CVC Capital Partners and hedge fund Elliott Management were interested in buying up the company’s operations in Eastern Europe and Israel.
Chief executive Mooky Greidinger said: ‘This agreement with our lenders represents a vote of confidence in our business and significantly advances Cineworld in achieving its long-term strategy in a changing entertainment environment.’
Cineworld operates just over 750 locations in ten countries, the vast majority of which are in the US and the British Isles, including the Picturehouse Cinemas chain, known for showing arthouse films.
Debt rose significantly prior to the pandemic following the acquisition of Tennessee-headquartered Regal Cinemas in 2018 for £2.7 billion.
Covid-19 lockdown restrictions subsequently led to the extended closure of cinemas around the world and caused film production to halt or be postponed.
While curbs have eased, ticket sales have yet to recover to pre-pandemic levels, even with a host of blockbuster releases like Top Gun: Maverick, James Bond movie No Time to Die, and sci-fi epic Dune.
Movie theaters have also faced stiff competition from streaming services such as Netflix, Amazon Prime and AppleTV, where many movies are released immediately and require a relatively inexpensive monthly subscription.
The cost-of-living crisis “also means that potential customers no longer feel the need to spend so much money on a movie theater experience,” said Victoria Scholar, chief investment officer at Interactive Investor.
She added: ‘These conditions are likely to take a long time to settle fully, with the sharp downward revision of Cineworld’s share price suggesting that some do not think it will ever happen.
Cineworld shares fell 14.5 percent, or 0.4 pence, to 2.48 pence in early trading, giving the company a total market capitalization of £24.7 million.