Tom Cruise attending the UK premiere of Top Gun: Maverick (Ian West/PA)
(Picture: PA Wire)Shares in the world’s second biggest cinema chain Cineworld crashed 80 per cent today on reports that it is preparing for bankruptcy.
The London based cinema operator, which has built up $4.8 billion of debt, said only two days ago that it had been hit by slower than expected ticket sales since the lifting of Covid restrictions.
But today the situation appears to have deteriorated with the Wall Street journal reporting that executives have appointed lawyers from law firm Kirkland & Ellis and consultants AlixPartners to advise on a Chapter 11 filing in America.
This is a process that protects a struggling US company from creditors to give it time to reorganise or sell itself to ward off a disorderly break-up.
A spokeperson for Cineworld, which suffered huge losses when it had to shut down its venues during the pandemic, declined to comment.
The WSJ report sent shares tumbling more than 80 per cent at one stage from 9.75p to less than 2p, before bouncing back to 4.4p. They are down almost 90 per cent this year.
Cineworld said not enough blockbusters such as Top Gun: Maverick, starring Tom Cruise, had been released recently to draw audiences back into its sites.
In its statement two days ago the company said Cineworld was in “active discussions with various stakeholders” and evaluating strategic options to obtain additional liquidity and potentially restructure its balance sheet to reduce debt. “Any deleveraging transaction will likely result in very significant dilution of existing equity interests in Cineworld,” it said.
It is the world’s second-largest cinema chain, with 9,518 screens across 790 sites in 10 countries: Bulgaria, Czech Republic, Hungary, Ireland, Israel, Poland, Romania, Slovakia, the United Kingdom and the United States.
