Cineworld confirms it is considering bankruptcy
Troubled cinema chain Cineworld (CINE.L) has confirmed that it is considering filing for bankruptcy protection in the United States, days after its shares plummeted over reports the business was in difficulties.
The company said its cinemas currently remain "open for business as usual".
In a statement, the firm said: "Cineworld would expect to maintain its operations in the ordinary course until and following any filing and ultimately to continue its business over the longer term with no significant impact upon its employees."
All of our Cineworld cinemas are open for business as usual, and we continue to welcome Cineworld Unlimited members and all of our customers, across the UK and Ireland.
We remain committed to being the Best Place to Watch a Movie.— Cineworld (@cineworld) August 20, 2022
The Wall Street Journal reported on Friday that Cineworld was preparing to file for bankruptcy "within weeks", sending its share price tumbling.
Responding to that report, Cineworld said it was looking at various options, including a Chapter 11 filing in the US.
Read more: Cineworld to file for bankruptcy after failing to rebuild attendance
The Chapter 11 bankruptcy mechanism allows a company to continue to operate while it negotiates with its creditors.
After more than halving on Friday, shares in Cineworld were hovering around 4p in early trading in London. The company's share price has plummeted about 85% so far this year, and were worth around £2 before the pandemic.
Victoria Scholar, head of investment at Interactive Investor, said: "The company has been destroyed by the pandemic. COVID meant that cinemas were closed for many months, Hollywood was unable to churn out hits and consumer preferences shifted towards streaming instead which has caused lasting damage for ticket demand even after movie theatres reopened.
"On top of that, Sky for example now releases new blockbusters at the same time as the cinemas, again reducing the incentive to leave the house and organise a cinema trip.
"Plus, Cineworld has been dealing with problems of its own with its £700m damages bill for abandoning its takeover of Cineplex, landing the embattled cinema chain with an unmanageable debt pile.
"Shares have plunged from above 300p before the pandemic to around 4p a share today."
Shareholders are likely to see their holdings in the cinema chain watered down as a result of the filing, it warned: “As previously announced, any deleveraging transaction would, however, result in very significant dilution of existing equity interests in Cineworld.
“Cineworld’s evaluation of these strategic options remains ongoing. A further announcement will be made if and when appropriate.”
The company said it is looking at options to raise “additional liquidity and potentially restructure its balance sheet through a comprehensive deleveraging transaction”.
It has been a tough couple of years for the cinema industry, despite recent blockbuster releases such as Top Gun: Maverick, The Batman, and Thor: Love And Thunder.
Read more: FTSE: Cineworld plunges almost 60% as lack of blockbusters bites
Last week Cineworld told investors that while demand has recovered a little following the pandemic, customers have not been flocking to cinemas in the numbers that had been expected.
“These lower levels of admissions are due to a limited film slate that is anticipated to continue until November 2022 and are expected to negatively impact trading and the group’s liquidity position in the near term,” it said.
Cineworld employs around 28,000 people across 10 countries, including more than 5,000 in the UK.
