Cineworld, the world’s second-largest cinema chain, is preparing to file for bankruptcy after not seeing a quick enough recovery in movies since the end of the pandemic.
The London-listed business, which has racked up more than $4.8bn (£4bn) in debt after losses soared while cinemas were closed during the global coronavirus crisis, has hired lawyers from Kirkland & Ellis and restructuring expert consultants AlixPartners to advise on the process.
According to the Wall Street Journal, the company, which operates 751 locations in 10 countries, including the Cineworld and Picturehouse chains in the U.K., is expected to file for Chapter 11 in the U.S. and is considering bankruptcy proceedings in the U.S. United Kingdom.
The already battered Cineworld share price fell from 20p to 2p after the report. Before the pandemic it was trading at £1.97.
The move follows Cineworld’s market value more than halving on Wednesday after the company said it had started talks with stakeholders over a financial rescue package, blaming a lack of blockbuster films for lower box office receipts. expected
The group said it was in “active discussions with various stakeholders” and evaluating strategic options to obtain additional liquidity and potentially restructure its balance sheet to reduce debt. “Any deleveraging transaction is likely to result in a very significant dilution of the existing holdings in Cineworld,” he warned.
Investors reacting to the news saw the company’s market value fall to less than £50m on Friday, having been valued at as much as £4.4bn before the pandemic wiped out nearly film industry
On Wednesday, the chain said it expected its commercial operations would not be affected by its move to seek financial stability and that it “expects to continue to meet its ongoing commercial counterparty obligations.”
Unions representing Cineworld’s 45,000 global workers, including more than 5,000 in the UK, expressed concern about their fate.
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“This is very worrying news, particularly for the UK workforce at Cineworld and Picturehouse which has already been through a tumultuous time during the pandemic,” said Philippa Childs, head of UK trade union Bectu.
“We will do everything we can to support our members during this difficult time and will look to Cineworld to mitigate the impact of any bankruptcy settlement on its employees.”
Cineworld, which faces a nearly $1 billion payment to pull out of a deal to buy Canadian rival Cineplex, reported a $493 million year-on-year rise in net debt to $4.8 billion of dollars by the end of 2021.
The group lost $708 million last year. However, revenue more than doubled from $852 million to $1.8 billion thanks to the latest James Bond and Spider-Man films. In 2020, the company reported a record loss of $3 billion.
“The company will blame the lack of summer blockbusters as the reason for its sharp decline, but in reality its aggressive acquisition plan has taken on too much debt and that was always a big risk as rates rise of interest,” said Walid Koudmani, chief market analyst. at XTB financial brokerage.
“Furthermore, the move to home entertainment and streaming providers has created a fundamental shift in the way consumers enjoy movies, and Cineworld simply hasn’t adapted fast enough. It’s all very sad, already that the UK high street is now likely to lose a popular and familiar brand.”
The company admitted about 95 million viewers in 2021, up 75% from 54 million in 2020, but well below the 275 million who attended before the Covid crisis.
The state of Cineworld is in stark contrast to the performance of AMC Entertainment, the world’s biggest film group and owner of the Odeon chain in the UK, which said new films Top Gun and Dr Strange had fueled a doubling of ticket sales in the US. .
The company, which has a market value of $12.8 billion, said July had the highest monthly attendance at U.S. theaters since before the pandemic.