Cineworld lifts curtain on a new era free of bankruptcy
BELEAGUERED cinema chain Cineworld expects to leave bankruptcy protection in July, after its creditors agreed to a debt restructuring deal.
It said that lenders controlling 99 per cent of its “legacy” debts and 69 per cent of its total debts have agreed to the £4.2billion restructuring plan it had put to US bankruptcy courts.
Cineworld was forced to put its US arm Regal into Chapter 11 bankruptcy protection last August, after struggling to cope with below pandemic audience levels, higher debt finance costs and increased competition that had left its finances in a precarious position.
The debt deal will hand control of the world’s second biggest cinema chain to its lenders, at the expense of its existing shareholders, who face losing the entirety of their investment.
“In light of the level of existing debt that is proposed to be released under the group Chapter 11 Companies’ plan of reorganisation, the proposed restructur- ing does not provide for any recovery for holders of Cineworld’s existing equity interests,” it said in a statement.
Six years ago, Cineworld shares hit a peak of 310p. Since then, they have plunged to 1p and are expected to become worthless.
The cinema chain, which also owns the Picturehouse and Cinema City chains in Europe, has net debt of over £7.1billion. In exchange for cutting Cineworld’s debt by half, creditors will be issued with £643million of new shares, the proceeds of which will be used to repay partially the £1.2billion bridging loan it took out to help it through Chapter 11.
Cineworld floated in 2007 and in May 2019, the company was worth £4.2billion. It is now worth around £14million. Victoria Scholar, head of investment at broker Interactive Investor, said: “Shareholders have had a tough time with this stock.”
Despite the drastic financial restructuring, Cineworld insisted that for its customers, it is still business as usual.
“Cineworld and its brands around the world, including Regal, Cinema City, Picturehouse and Planet, are continuing to welcome customers to cinemas as usual.The group continues to honour the terms of all existing customer membership programmes,” it said.