Cineworld Group Plc is preparing to file for bankruptcy, according to the Wall Street Journal. Cineworld this week warned audience numbers have been weaker than expected and predicted they will stay low until November due to “limited” film releases. The world’s second largest cinema business said earlier this week it was 'assessing options to shore up its finances' as a result.
The WSJ says Cineworld has engaged Kirkland and Ellis lawyers as well as consultants from Alix Partners to advise on the bankruptcy process. The paper says the group is looking at Chapter 11 bankruptcy in the USA and insolvency in the UK.
The group, which also owns the Picturehouse chain in the UK and Regal Cinemas in the US, had pinned its hopes on releases such as Top Gun: Maverick, The Batman and Thor: Love And Thunder to aid its recovery from the heavy impact of the pandemic. However, in a statement the firm said: “Despite a gradual recovery of demand since reopening in April 2021, recent admission levels have been below expectations.
“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.”
Cineworld said it will continue with cost-saving plans but will also look at new options to improve its financial position. The business, which was saddled with 4.8 billion dollars (£4 billion) of debt at the end of the last financial year, said it is in talks with stakeholders over potential funding or considering restructuring its balance sheet.
Liberum analyst James Wheatcroft said its heavy debt burden means a balance sheet restructuring will “likely leave little for existing Cineworld shareholders”. Cineworld said: “The group’s business operations are expected to remain unaffected by these efforts and Cineworld expects to continue to meet its ongoing business counterparty obligations.
“Cineworld continues to welcome guests to its cinemas across its global markets as normal, without disruption.” It comes after the business posted a loss of 565.8 million US dollars (£429 million) in 2021 as revenues were boosted by higher admissions.
Sentiment around the company has also been dented over the past year by a pair of separate legal spats. In September, the London-listed business struck an agreement to pay 170 million US dollars to disgruntled Regal shareholders who were frustrated with the price it purchased the US cinema chain for following a dispute, although it has subsequently sought to delay some payments.
Meanwhile, in December it was ordered to pay 1.23 billion Canadian dollars (£720 million) by a court after it decided not to go through with a takeover of Canadian rival Cineplex as the pandemic broke out. Chief executive Mooky Greidinger appealed against the court ruling and claimed the company acted in “good faith”.
