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Cineworld Group PLC on Monday confirmed it is considering filing for Chapter 11 bankruptcy in the US, as it continues to battle with liquidity issues.
Shares in Cineworld were trading 11% higher at 4.5 pence in London early Monday, after slumping 58% on Friday. Since the start of 2022, the stock has tumbled over 85%.
Last Wednesday, Cineworld said it was in ‘active discussions’ with various stakeholders, to explore the possibilities of securing further liquidity or restructuring its balance sheet through a ‘comprehensive deleveraging transaction’. It also warned that lacklustre trading was prompting potential financing decisions that could significantly dilute shareholders.
The Picturehouse chain owner said recent admission levels have been below expectations, despite a slow recovery in demand since re-opening from Covid restrictions in April 2021.
The lower admission levels stem from a ‘limited film slate’, according to the company, which it expects to persist until November. The low demand will be likely to hit trading and its liquidity position in the meantime, it added.
On Friday, the Wall Street Journal reported that the London-based cinema chain has engaged with lawyers from Kirkland & Ellis LLP and consultants from AlixPartners to advise Cineworld on its bankruptcy process.
It said that Cineworld is expected to file a Chapter 11 petition in the US, and is also considering filing for an insolvency proceeding in the UK.
Cineworld owns the Regal cinema chain in the US.
In response, on Monday Cineworld said strategic options through which it may achieve its restructuring objectives include a possible voluntary Chapter 11 filing in the US and associated ancillary proceedings in other jurisdictions as part of an orderly implementation process.
Cineworld also said it is in discussions with many of its major stakeholders including its secured lenders and their legal and financial advisers.
The company said: ‘Any such filing would be expected to allow the group to access near-term liquidity and support the orderly implementation of a fully funded deleveraging transaction.
‘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.
‘As previously announced, any deleveraging transaction would, however, result in very significant dilution of existing equity interests in Cineworld,’ it confirmed.
It added that its Cineworld and Regal movie theatres across the globe are ‘open for business as usual’ and will continue to welcome customers and members.
At the end of December, its net debt stood at a startling $4.84 billion, with cash and restricted cash of $354.3 million.
Cineworld said it will update the market ‘if and when appropriate’. Its interim results are due on September 22.
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