Cineworld shares plummet as troubled group targets £1.8bn fundraise in efforts to drag itself out of bankruptcy
- Cineworld filed for Chapter 11 protection in the United States last September
- The firm’s debts soared following the £2.7bn takeover of Regal Cinemas in 2018
- Covid-19 piled on problems as lockdowns led to cinemas temporarily closing
Embattled cinema chain Cineworld is seeking to raise approximately £1.8billion from investors as part of effotts to exit bankruptcy.
The world’s second-largest cinema chain filed for Chapter 11 protection in the US last September, which allowed it to maintain operations while working with creditors on a rescue plan.
Cineworld told investors on Monday it had agreed a restructuring arrangement, which sees its lenders offering £1.2billion in new debt financing and the group raising £651million through an equity issue.
Troubled times: Cineworld filed for Chapter 11 protection in the United States last September, which allowed it to maintain operations while working with creditors on a rescue plan
If implemented, it hopes the deal would slash its $5billion debt pile by approximately 90 per cent and allow it to fund future business operations.
Cineworld has also been looking to sell its US, UK and Ireland businesses but has struggled to find a buyer, although talks about offloading divisions in other countries are continuing.
Sky News reported last week that CVC Capital Partners and hedge fund Elliott Management were interested in buying up the firm’s operations in eastern Europe and Israel.
Chief executive Mooky Greidinger said: ‘This agreement with our lenders represents a ‘vote-of-confidence’ in our business and significantly advances Cineworld towards achieving its long-term strategy in a changing entertainment environment.’
Cineworld runs just over 750 sites across ten countries, with the overwhelming majority across the US and British Isles, including the Picturehouse Cinemas chain, known for showing arthouse pictures.
Its debts soared significantly prior to the pandemic following the £2.7billion takeover of Tennessee-headquartered Regal Cinemas in 2018.
Covid-19 lockdown restrictions then led to the extended closure of movie theatres across the world and caused film production to cease or be delayed.
Even though curbs have loosened, ticket sales have yet to recover to pre-pandemic levels even with a host of blockbuster releases like Top Gun: Maverick, James Bond film No Time to Die, and science-fiction epic Dune.
Cinemas have also faced heavy competition from streaming services like Netflix, Amazon Prime and AppleTV, where many films are released immediately and require a relatively cheap monthly subscription to access.
The cost-of-living crisis also ‘means prospective customers no longer feel the need to spend on a cinematic experience as often,’ noted Victoria Scholar, the head of investment at Interactive Investor.
She added: ‘These conditions are likely going to take a long time to fully unwind, with the sharp downwards revision in Cineworld’s share price suggesting some don’t think this will ever happen.
Cineworld shares plunged 14.5 per cent, or 0.4p, to 2.48p in early trading, giving the firm a total market capitalisation of £24.7million.