Cinema chain operator Cineworld, which also owns Cinema City theatres, files for US bankruptcy
It has been suspected for weeks, but it is now official: the British 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.
The so-called Chapter 11 filing, which allows companies to stay in business while they try to restructure their debt, affects Cineworld’s US, UK and Jersey operations, which cover much of its business.
Cineworld said that it expects to exit Chapter 11 protection in the first quarter of 2023 and, in the process, intends to pay all of its suppliers in total and its employees their regular wages.
The group’s companies have $1.94 billion in commitments from existing creditors, and Cineworld expects to operate its global business and cinemas as usual during the process, it added.
Shares in the group, which fell to a record low of 1.80 pence after the Wall Street Journal first reported the company’s possible bankruptcy in August, settled 9.9 per cent higher at 4.29 pence on Wednesday.
Two years ago, it abandoned takeover plans for rival Cineplex (CGX.TO) and is still in a legal dispute with the Canadian company, which is seeking 1.23 billion Canadian dollars ($946 million) in damages.
Cineplex said it is studying the bankruptcy filings in detail and will explore all options to advance its claim against Cineworld.
Although the company reiterated that there is no guarantee that any return will be made to existing shareholders, it does not expect the filing to result in the suspension of trading in its London shares.
Cineworld also said that it expected to change its real estate strategy in the US and work with landlords to improve its US cinema rental terms.
While the cinema industry is struggling to recover from the pandemic, Cineworld’s specific problem is its accumulated debt over the years.
Its net debt, including lease obligations, stood at $8.9 billion at the end of 2021. Excluding lease obligations, net debt was $4.84 billion at that time. The company’s market value at Wednesday’s close was about 59 million pounds ($68 million).
The company, which operates over 9,000 cinemas in 10 countries and employs about 28,000 people, took on debt to finance part of Regal’s $3.6 billion acquisition in 2017 and more to survive the pandemic.
There is no news yet on whether the current situation will affect Cinema City’s Hungarian operations in any way.
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