Cineworld, the world’s second-largest movie theater chain, saw its share price plummet by 28% to 2.1p per share on Monday after announcing a multibillion-dollar restructuring package to avoid bankruptcy. The company has failed to sell its North American and British Isles operations, prompting it to look for $2.26 billion in new funding to continue operating. Earlier this year, Cineworld initiated a marketing process to sell off properties. However, after discussions with important stakeholders, the company has decided to discontinue the marketing process unless a cash bid significantly higher than the proposed restructuring price is received.
Failed Asset Sale
Five years ago, US industry giant Regal Entertainment acquired Cineworld, which now operates more than 750 cinemas worldwide. Cineworld’s “Rest of the World” division encompasses cinemas in multiple countries, including Poland, Romania, Hungary, the Czech Republic, Bulgaria, Slovakia, and Israel. Although Cineworld has stated that it will still consider proposals for the sale of its operations in other regions, it anticipates that the new $2.26 billion restructuring program will offer adequate flexibility to facilitate the sale of its ‘rest of the world’ business. The sale of Cineworld’s “rest of the world” operations would require a proposal. The Chapter 11 entities and their shareholders would make any proposal for the sale.
Restructuring Plan
Cineworld’s newly announced fundraising plan will see the company receiving $1.46 billion in fresh debt. Also, it will provide $800 million in equity to its lenders. This initiative is expected to reduce the debt to lenders by a considerable $4.53 billion, given that the business had a net debt of $8.4 billion as of September. Cineworld’s CEO, Mookie Greidinger, expressed his satisfaction with the agreement. He called it a ‘vote of confidence’ in the business and a significant step towards achieving its long-term objectives in the evolving entertainment industry. Cineworld has made it clear that holders of its existing equity interests will not receive any recovery under the proposed restructuring, given the expected level of existing debt to be issued under the plan.
Uncertainty Ahead
Cineworld, grappling with increasing debts, filed for Chapter 11 bankruptcy protection in the US in September 2022. The company had invested significantly to expand its global presence. However, it faced challenges servicing borrowings as its cinemas had to shut down due to the Covid-19 pandemic. Since the start of 2020, Cineworld’s shares have nosedived by 99%. The growing popularity of streaming services has also led to uncertainty and reduced box office sales. Additionally, the company has incurred losses of C$1.23bn ($960m) in connection with the failed acquisition of Cineplex of Canada during the pandemic’s peak. Cineworld has contested the December 2021 verdict of the Ontario Superior Court of Justice on this matter.
About Cineworld
Cineworld is a British cinema company that operates in more than ten countries. This includes the United Kingdom, the United States, Poland, Israel, and Hungary. The company, founded in 1995, has its headquarters in London, England. As of 2021, Cineworld operates over 9,500 screens in 790 cinemas worldwide. In addition to its theaters, Cineworld offers online ticket booking, gift cards, and movie-related merchandise. The company has faced challenges due to the COVID-19 pandemic and the growing popularity of streaming services. However, it remains committed to providing moviegoers with high-quality cinema experiences.
The cinema industry has been hit hard by the Covid-19 pandemic. Many cinemas around the world are forced to close for extended periods. The shift towards streaming services has also posed a threat to the industry. Many consumers watch films from their homes rather than going to the cinema. However, pandemic restrictions are easing in many parts of the world. There is hope that the cinema industry will bounce back. It could return to its former glory.