British cinema chain Cineworld has confirmed that it is considering filing for bankruptcy among several “strategic options” possible for “find new liquidity and potentially restructure its balance sheet” faced with a crisis in cinemas.
While specifying that the rooms “Cineworld and Regal worldwide are operating normally”, the second chain of cinemas in the world after the American AMC notes Monday August 22 in a press release that “strategic options” considered “include the voluntary placement in bankruptcy filing” in the United States and procedures “associated” in other jurisdictions.
Cineworld adds be in “discussions with many stakeholders including its secured debt creditors”. A bankruptcy filing “would allow the group to access short-term liquidity and support the orderly implementation of debt relief”, the statement added. According to the chain, it would maintain its operations in such an eventuality, which would not have “no significant impact on employees”. On the other hand, this would result in a “very significant dilution of equity investments in Cineworld”.
More than one “decline of cinema”, “Cineworld’s problems stem from an overly aggressive growth strategy that relied on mountains of debt to pay for the purchase of the American chain Regal”, Judge Russ Mould, an analyst at investment firm AJ Bell. The group manages more than 9,000 screens at 751 sites in 10 countries, notably under the Cineworld and Picturehouse brands in the United Kingdom and Ireland, and Regal Cinemas in the United States.
Last week, the group lamented a slower-than-expected recovery in demand since theaters reopened post-lockdown, which Cineworld attributes to a lack of “blockbusters”, high-grossing films. The cinema chain had divided by five last year its massive loss of 2.7 billion dollars recorded in 2020, at the height of the pandemic, when it had to close all its rooms.
At the end of 2021, it had seen its activity recover, in particular thanks to the success of Spiderman, without returning to pre-Covid levels. But the group’s debt has swelled. In 2018, Cineworld bought the American chain Regal Entertainment for some 5.8 billion dollars (4.9 billion euros). From the following year and despite an already significant debt, the group had tried to get their hands on the Canadian chain Cineplex. But the merger then fell through and the group was heavily fined by a Canadian court which ordered it to pay nearly 1.3 billion Canadian dollars (about 1.7 billion euros ) damages. Cineworld appealed.