Cineworld is about to file for bankruptcy following a collapse of audiences during the Covid crisis.
As it fights to remain afloat, the world’s second-largest cinema chain has employed lawyers and consultants in advance of possible petitions in US or UK courts.
@cineworld shares #CINE have nosedived following reports the chain is planning to file for bankruptcy in the US within weeks. The world’s second-largest cinema operator has racked up a debt pile of almost $5bn pic.twitter.com/aSTJS7WC73
— Share_Talk ™ (@Share_Talk) August 19, 2022
The shares of the London-listed company fell as much as 80pc. They dropped to a new low at 1.8 pence, before closing at 4.1 pence following the Wall Street Journal’s report.
This follows a 60 per cent drop in shares on Wednesday when the company stated it was holding rescue negotiations with investors.
Kirkland & Ellis, a Chicago law firm, has been reportedly brought in to provide advice along with AlixPartners from New York. Cineworld declined to comment.
The company blames the financial turmoil on poor box office sales. This has put pressure on its finances and made it more difficult to pay off debt.
Cineworld may file for Chapter 11 bankruptcy in the United States within weeks. A UK insolvency filing is also being considered.
The chain employs thousands of people in the UK and has 127 Cineworld and Picturehouse theatres. It employs approximately 28,000 people worldwide.
Cineworld temporarily closed its UK cinemas during the pandemic and put 5,500 employees on furlough.
Philippa Childs is the head of Bectu’s entertainment and media union. She said that this was very concerning news, especially for Picturehouse and Cineworld workers in the UK, who had already experienced a difficult time during the pandemic.
“Covid-19 has caused a devastating blow to the UK’s cinema industry and this news will be extremely distressing for cinema workers.”
“We will support our members through this difficult time, and we will look to Cineworld for ways to minimize the impact of any bankruptcy arrangements upon its employees.”
Cineworld’s spokesperson said that they didn’t have any additional information beyond Wednesday’s statement.
The business suffered a loss of $708 million (£599m), compared to a loss of $3bn in 2020. This was despite sales being boosted by new James Bond films and Spiderman movies.
The company, which could be fined $1bn for pulling off the takeover of Canada’s Cineplex, has also added $493m more to its debt pile, bringing the total to $4.8 billion.
Cineworld warned Wednesday that ticket sales were “below expectations” despite blockbuster films like Top Gun: Maverick and Thor. The warning also indicated that there was a possibility of a disappointing future lineup, which could lead to further malaise until November.
The company stated that it continued to trade as normal.
Cineworld warned shareholders that they can expect a “very substantial dilution” to their holdings if it is able to strike a rescue agreement.
Steve Wiener founded Cineworld and opened the first Cineworld theatre in Hertfordshire, in 1996.
After growing to be one of the UK’s most popular cinema chains, the business merged with Cinema City International in 2014. This group was controlled by the Greidinger family from Israel.
It took over Regal, the US’ largest cinema chain, in a £2.7bn acquisition three years later.
Cineworld’s chief executive, Mooky Greidinger recently expressed his concerns for the company.
He said that the future of the company was uncertain during an Israeli court hearing regarding a dispute over local distribution.
Local media reported that he stated: “We were an unparalleled success story.”
“I don’t believe there are many Israeli companies who have reached a similar status to the second-largest cinema chain in the world.
“But two and a half years ago, our life’s work fell apart. Covid-19 has been a catalyst for me to fight every day to save the things we’ve built over the past two and a half years.
“I hope that we succeed, but it’s not certain.”
