Britain’s Cineworld, the world’s second-biggest cinema chain, has filed for bankruptcy protection in the US as it seeks to restructure after facing low audience numbers.
The group operates 751 movie theatres including more than 500 in the United States, more than 100 in Britain and Ireland, and others across Europe and Israel. It owns the Picturehouse chain in Britain and Regal cinemas in the US.
Cineworld said in a statement that it filed for Chapter 11 protection, a court-supervised restructuring process that gives companies time to negotiate with creditors to reach a settlement on the reduction of debts.
Cineworld said it “will seek to implement a deleveraging 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 statement said it hoped to emerge from bankruptcy proceedings in the first quarter of 2023, and had $1.94bn in financing from existing lenders to help it through.
The company also warned existing shareholders that their holdings would probably be considerably diluted as part of the bankruptcy process.
Eric Snyder, a bankruptcy expert at Wilk Auslander, said Cineworld’s creditors were not giving it “a lot of time to make the decision between reorganising or selling it”.
“Travelling to a movie theatre to watch a movie for two to three hours, and spending $20 to $25, is just not attractive any more for a lot of people, especially young people,” Snyder said.
Cineworld’s shares had been sliding since the beginning of the year as its position deteriorated when people didn’t return to cinemas in droves after Covid lockdowns were eased.
Shares plummeted in September when it acknowledged it may file for bankruptcy.
Cineworld shares rose 10% on Wednesday to 4.29p, but were still down 87% from the start of the year.
Analysts argue that Cineworld’s 2018 takeover of Regal in America left it saddled with too much debt, putting it in a poor position to weather the pandemic.