Cineworld, the world’s second-largest cinema chain, has filed for bankruptcy protection in the US after buckling under a debt load worsened by pandemic closures.
The UK-based owner of chains such as Regal Cinemas said in a filing on Wednesday that it was seeking to cut its debt and shore up its balance sheet through a restructuring of its UK, US and Jersey businesses, in a move that is set to all but wipe out equity holders.
The company has secured a debtor-in-possession financing facility of almost $2bn from its lenders, which include US investment managers Invesco, Eaton Vance and State Street.
The lenders are expected to take control during the bankruptcy process. Cineworld said it would set out further restructuring plans “in due course”, while its London-listed shares will not be suspended.
A deal to reduce the group’s nearly $9bn in debt and lease liabilities would “result in very significant dilution of equity interests in the group”, said Cineworld, warning that “there is no guarantee of any recovery for holders of existing equity interests”.
The filing follows a years-long struggle with a debt pile incurred through expansion, including the 2017 acquisition of Regal, while ticket sales were hit by the rise of streaming along with Covid-19 closures. Chief executive Mooky Greidinger twice agreed rescue packages with lenders to avoid bankruptcy during the pandemic.
The group’s London-listed shares have shed 93.6 per cent of their value over the past year as the group floundered, though they rose almost 10 per cent on Monday to 4.3p.
“The pandemic was an incredibly difficult time for our business, with the enforced closure of cinemas and huge disruption to film schedules that has led us to this point,” said Greidinger.
“This latest process is part of our ongoing efforts to strengthen our financial position and is in pursuit of a deleveraging that will create a more resilient capital structure and effective business,” he added.
The company also plans to discuss improving US cinema lease terms with landlords and said it expected to emerge from Chapter 11 during the first quarter of 2023.
Employees will continue to be paid, while its chains, which also include Cinema City, Picturehouse and Yes Planet, will carry out business as usual.
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