Regal Parent Cineworld Files For Bankruptcy
7th September 2022

The shoe finally fell today as giant theater chain Cineworld filed for Chapter 11. The bankruptcy includes a $1.94 billion debtor-in-possession financing facility from existing lenders to keep things running.

The heavily indebted parent of Regal Cinemas filed in United States Bankruptcy Court for the Southern District of Texas. Cineworld had signaled distress in August and said measures it was considering options, included a voluntary bankruptcy.

Here’s what the company said:

“Cineworld Group plc and its subsidiaries…, a leading cinema operator in 10 countries including the United States and the United Kingdom with 747 sites and 9,139 screens globally, today announced that Cineworld and certain of its subsidiaries (collectively, the “Group Chapter 11 Companies”) have commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of Texas (the “Court”).

As part of the Chapter 11 cases, Cineworld, with the expected support of its secured lenders, will seek to implement a de-leveraging transaction that will significantly reduce the Group’s debt, strengthen its balance sheet and provide the financial strength and flexibility to accelerate, and capitalise on, Cineworld’s strategy in the cinema industry. The Group Chapter 11 Companies enter the Chapter 11 cases with commitments for an approximate $1.94 billion debtor-in-possession financing facility from existing lenders, which will help ensure Cineworld’s operations continue in the ordinary course while Cineworld implements its reorganisation.

As previously announced, it is expected that any de-leveraging transaction will result in very significant dilution of existing equity interests in the Group and there is no guarantee of any recovery for holders of existing equity interests. The Company does not expect the Chapter 11 filing to result in a suspension of trading in its shares on the London Stock Exchange.

The Group Chapter 11 Companies expect to file a proposed plan of reorganisation (the “Plan”) with the Court in due course and to meet the necessary requirements to emerge from Chapter 11 as expeditiously as possible. Cineworld currently anticipates emerging from Chapter 11 during the first quarter of 2023 and is confident that a comprehensive financial restructuring is in the best interests of the Group and its stakeholders, taken as a whole, in the long term. Cineworld looks forward to working with its creditors and stakeholders to advance the Group’s efforts to restructure its balance sheet.

As part of its restructuring process, Cineworld expects to pursue a real estate optimisation strategy in the US and intends to engage in collaborative discussions with US landlords to improve US cinema lease terms in an effort to further position the Group for long-term growth.”

Cineworld has 750 theaters in ten countries, expanding at a cost. It took on significant debt acquiring Regal in 2018 for $3.6 billion. While the chain made some progress paying it down, it didn’t enter Covid on great financial footing. Total debt and liabilities at the end of 2021 was $8.9 billion. Separately, Canadian judge ruled late last year the company is liable for more than $1 billion in damages for back out of a deal to buy Cineplex.

With movie theaters closed for months, exhibition was among the industries hardest hit by the pandemic. And a string of tentpoles that buoyed attendance earlier this year box office trailed off into a soft slate for August and September. Another chain, Vue International is also being restructured. AMC Entertainment survived bankruptcy in large part due to its odd genesis into a meme stock, which inflated its share price and led to a series of beneficial transactions

While Regal will stay in business, it’s likely some theaters will close, and others picked up by other players. Consolidation is considered inevitable for an over-screened U.S., especially as smaller chains star to run out of Covid relief funds.

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