The debt-laden Cineworld Group and its subsidiaries have commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of Texas, the company revealed on Wednesday.
The company, which owns Regal Cinemas in the U.S., said in a statement: “As part of the Chapter 11 cases, Cineworld, with the expected support of its secured lenders, will seek to implement a de-leveraging transaction that will significantly reduce the Group’s debt, strengthen its balance sheet and provide the financial strength and flexibility to accelerate, and capitalise on, Cineworld’s strategy in the cinema industry.”
“The Group Chapter 11 Companies enter the Chapter 11 cases with commitments for an approximate $1.94 billion debtor-in-possession financing facility from existing lenders, which will help ensure Cineworld’s operations continue in the ordinary course while Cineworld implements its reorganization,” the statement added.
As part of its process, Cineworld will “pursue a real estate optimisation strategy in the U.S. and intends to engage in collaborative discussions with U.S. landlords to improve U.S. cinema lease terms in an effort to further position the group for long-term growth,” it said, adding that it expects to operate its global business and cinemas as usual without interruption.
As the company had revealed in August, it said that it is “expected that any de-leveraging transaction will result in very significant dilution of existing equity interests in the group and there is no guarantee of any recovery for holders of existing equity interests.” The company also said that it not expect the Chapter 11 filing to result in a suspension of trading in its shares on the London Stock Exchange.
Cineworld said that it anticipates emerging from Chapter 11 during the first quarter of 2023 and is confident that a comprehensive financial restructuring is in the best interests of the group and its stakeholders in the long term.
The company recorded a $708.3 million loss before tax for the full year ending Dec. 31, 2021, a vast improvement from the $3 billion loss in 2020. However, the group’s net debt, excluding lease liabilities, increased by $492.7 million from $4.33 billion to $4.84 billion. In July 2021, Cineworld secured $200 million of additional liquidity via incremental loans.
Cineworld CEO Mooky Greidinger said: “We have an incredible team across Cineworld laser focused on evolving our business to thrive during the comeback of the cinema industry. The pandemic was an incredibly difficult time for our business, with the enforced closure of cinemas and huge disruption to film schedules that has led us to this point. “
“This latest process is part of our ongoing efforts to strengthen our financial position and is in pursuit of a de-leveraging that will create a more resilient capital structure and effective business. This will allow us to continue to execute our strategy to reimagine the most immersive cinema experiences for our guests through the latest and most cutting- edge screen formats and enhancements to our flagship theatres. Our goal remains to further accelerate our strategy so we can grow our position as the best place to watch a movie,” Greidinger added.
Cineworld operates in 10 countries including the U.S. and the U.K. with 747 sites and 9,139 screens globally.
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