Operator of cinema chain Cineworld files for bankruptcy in the United States By Reuters
© Reuters. FILE PHOTO: People walk past a Cineworld in Leicester’s Square amid the coronavirus disease (COVID-19) outbreak in London, Britain October 4, 2020. REUTERS/Henry Nicholls
(Reuters) – Britain’s Cineworld Group filed for bankruptcy protection in the United States on Wednesday as the world’s second-largest cinema chain operator struggles to rein in its massive debt load.
The Chapter 11 filing, which allows companies to stay in business while trying to restructure debt, involves Cineworld’s operations in the US, UK and Jersey, covering the bulk of its business.
Cineworld said it expects to emerge from Chapter 11 protection in the first quarter of 2023 and intends to pay all of its suppliers in full during the process as well as pay employees their regular wages.
The group companies have $1.94 billion in commitments from existing lenders and Cineworld plans to operate its global business and cinemas as usual throughout the process, it added.
Shares of Cineworld, which hit a record low of 1.80 pence after the Wall Street Journal first reported its potential bankruptcy in August, rose 9.9% to 4.29 pence on Wednesday.
Two years ago it scrapped plans to take over rival Cineplex and is in a legal dispute with the Canadian company, which has sought 1.23 billion Canadian dollars ($946 million) in damages.
Cineplex said it would thoroughly review the documents filed in the bankruptcy proceedings and explore all available avenues to advance its claim against Cineworld.
Although Cineworld has reiterated that there is no guarantee of recovery for holders of existing stakes, it does not expect the filing to result in a suspension of trading in its London shares.
Cineworld also said it plans to change its US real estate strategy and will engage with landlords to improve rental terms for US theaters.
As the movie industry struggles to recover from the pandemic, Cineworld’s specific problem is the amount of debt it has racked up over the years.
Its net debt, including lease debt, was $8.9 billion at the end of 2021. Excluding lease debt, its net debt was $4.84 billion at that time. The company’s market value was around 59 million pounds ($68 million) at Wednesday’s close.
Cineworld, which operates more than 9,000 screens in 10 countries and employs around 28,000 people, went into debt to fund part of its $3.6 billion purchase of Regal in 2017, and more to survive the pandemic. .
($1 = 0.8720 pounds)