Bosses at Cineworld are considering whether to put the world’s second largest cinema chain into bankruptcy. They confirmed on Monday that they are looking at options for restructuring the business, which is struggling under heavy debts.
This might lead to a Chapter 11 bankruptcy filing in the US. Chapter 11 is often referred to as reorganisation bankruptcy and does not mean the end of the line for the company.
Firms including General Motors and Marvel Entertainment have in the past made Chapter 11 filings, only to bounce back later. The announcement from Cineworld came days after the Wall Street Journal first reported that the company was on the verge of declaring it is bankrupt.
A Chapter 11 gives companies a chance to propose a reorganisation, and the banks, suppliers and employees they owe money to are allowed to vote on the plan. After the filing is made, the company remains in control of its assets and does not have to shut down or liquidate its business to pay off debts.
It is also protected from foreclosure and repossessions. “Cineworld and Regal theatres globally are open for business as usual and continue to welcome guests and members,” the company told shareholders.
“The strategic options through which Cineworld may achieve its restructuring objectives include a possible voluntary Chapter 11 filing in the United States and associated ancillary proceedings in other jurisdictions as part of an orderly implementation process. Cineworld is in discussions with many of its major stakeholders, including its secured lenders and their legal and financial advisers.”
Importantly, the company’s cinemas would be able to continue to trade throughout the whole process. It brings some respite for workers at the 127 cinemas that Cineworld runs in the UK, which include the Picturehouse chain.
Globally the cinema giant employs around 28,000 people across 10 countries. The business added: “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."
But it said shareholders are likely to see their holdings in the cinema chain watered down as a result of the filing. It has been a tough couple of years for anyone in the cinema business, despite recent blockbuster releases such as Top Gun: Maverick, The Batman and Thor: Love And Thunder.
Last week Cineworld told investors that, while demand has recovered a little following the pandemic, recently 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.
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