Cineworld has said it might file for bankruptcy in the US, days after reports that the cinema giant was teetering on the brink.
The chain has said its cinemas are “still open”, and claimed this would allow the business to operate more or less as normal.
The conglomerate based in London has 128 cinemas in the UK and Ireland as well as 751 in total around the globe.
It is the second-largest cinema chain in the world after AMC Theatres.
Cineworld Group is preparing to file for bankruptcy within weeks, according to The Wall Street Journal.
Here is all you need to know:
What has happened?
Wall Street Journal reported that Cineworld Group is preparing to file for bankruptcy as it struggles to rebuild attendance from pandemic lows, citing people familiar with the matter.
The company is listed on the London Stock Exchange as CINE.
What has Cineworld said?
In a post on social media on Saturday (20 August) night, Cineworld’s official Twitter account wrote: “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.”
This morning (22 August), PA reported that Cineworld said it might file for bankruptcy in the US.
Responding to a report in The Wall Street Journal, bosses said they are considering options for how to restructure the business.
These include a Chapter 11 bankruptcy filing, which is often referred to as a reorganisation bankruptcy.
It would allow the business to continue to operate more or less as normal, and would have minimal impact on its employees, Cineworld said.
“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.
“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.”
What does bankruptcy mean?
Company Debt explains it as: “When a company goes bankrupt, it means there is either no cash to pay bills, or more liabilities than assets.”
Cineworld could file for a Chapter 11 bankruptcy 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.
Find out more about insolvency and bankruptcy in our explainer.
How has the share prices reacted?
Following the reports of bankruptcy, Cineworld Group’s shares plunged 79% to just £2 a share on the LSE, as of 1.50pm on Friday (19 August).
Shares had already fallen this week plunging by more than 60 % on Wednesday after the chain warned its audience numbers have been weaker than expected amid limited film releases.
Shares dived by two-thirds within minutes of reports by the Wall Street Journal that the world’s second biggest cinema business has hired lawyers from Kirkland & Ellis and consultants from AlixPartners to advise the bankruptcy process.
Cineworld said that shareholders are likely to see their holdings in the cinema chain watered down as a result of the filing.
What is the reaction about the reports?
The Wall Street Journal report cast uncertainty over the future of thousands of workers at its 127 UK cinemas.
Cineworld employs around 28,000 workers globally, with operations in 10 countries.
Philippa Childs, head of entertainment and media union Bectu, said: “This is very worrying news, not least for the UK’s Cineworld and Picturehouse workforce who have already been through a tumultuous time during the pandemic.
“The UK’s cinema industry suffered an incredible blow due to Covid-19 and this latest news will be very unsettling for cinema workers.
“We will do everything we can to support our members during this challenging time and will be looking to Cineworld to mitigate the impact of any bankruptcy arrangements on its employees.”
Why is Cineworld Group struggling?
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.
Earlier this week, Cineworld warned audience numbers have been weaker than expected and predicted they will stay low until November due to “limited” film releases.
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 Group has struggled with debts
The business was saddled with 4.8 billion dollars (£4 billion) of debt at the end of the last financial year.
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.
What chains does Cineworld Group operate?
Cineworld Group has 9,518 screens across 790 sites in 10 countries.
- Cineworld - 102 sites, 1,099 screens - UK & Ireland
- Picture House - 26 sites, 93 screens - UK
- Regal Cinemas - 511 sites, 6,853 screens - United States
- Cinema City - 102 sites, 1,014 screens - Central and Eastern Europe
- Yes Planet - 10 sites, 130 screens - Israel
The company was founded in 1995 by Steve Weiner and opened its first cinema in Stevenage, Hertfordshire in July 1996.
Has the company faced legal struggles recently?
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”.