UK-based cinema chain Cineworld confirmed on Monday that a US bankruptcy filing is among the options for the debt-laden group, hit by dwindling viewership.
The group, which operates hundreds of cinemas mostly in the United States, said last week that it was “evaluating various strategic options” to boost liquidity and possibly restructure, with demand having been below expectations since reopening due to the pandemic .
Cineworld said in an update Monday that those options “include a possible voluntary filing under Chapter 11 in the United States and related ancillary proceedings in other jurisdictions.”
The London-listed group added it was in talks with “many of its key stakeholders, including its secured lenders”.
A Chapter 11 filing “would provide the group with access to short-term liquidity and support the proper implementation of” debt reduction, she noted.
With such an outcome, Cineworld would continue its normal operations with no “material impact” on staff.
However, she also warned of a “very significant dilution of existing holdings”.
Further announcements would be made as appropriate, he added.
Cineworld’s share price has plummeted since the beginning of this year and was down to just threep on Monday.
Analysts argue that the 2018 acquisition of American competitor Regal caused too much debt.
The chain, whose second largest market is the UK, was then hit hard by the fallout from the pandemic and the booming popularity of streaming.
“Cineworld’s problems stem from an overly aggressive growth strategy that relied on using huge amounts of debt to buy US chain Regal,” said Russ Mold, an analyst at AJ Bell.
“This may have made Cineworld one of the largest cinema operators in the world, but bigger isn’t necessarily better – and the pandemic has quickly exposed the company’s stretched balance sheet.”
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