Cineworld cinema chain is ‘preparing to file for bankruptcy within weeks’ after struggling to rebuild post-Covid audiences
- Cineworld Group Plc owns Cineworld and is said to be in financial trouble
- The British cinema company has engaged lawyers, an insider source says
- The company says a lower number of films has caused a large fall in attendance
Cineworld Group Plc, the owner of Cineworld cinemas in the UK and Regal Cinemas in the US, is reportedly preparing to file for bankruptcy within weeks after struggling to rebuild attendance from pandemic lows.
The British cinema company has engaged lawyers from Kirkland & Ellis LLP and consultants from AlixPartners to advise on the bankruptcy process, an inside source told the Wall Street Journal.
It comes after Cineworld announced on Wednesday that performance since April 2021 was ‘below expectations’.
The company has 127 branches in the UK alone, meaning thousands of jobs could be at risk.
Cineworld currently operates in the UK, Ireland, Poland, the Czech Republic, Slovakia, Hungary, Bulgaria, Romania, Israel and the US, employing 28,000 people in total.
The chain had to be rescued by investors during the coronavirus pandemic when all its branches had to close. They placed 5,500 staff on furlough and carried out both voluntary and compulsory redundancies.
The owners of Cineworld, Cineworld Group Plc, are understood to be considering filing for bankruptcy in the UK
In January 2021 bosses faced a backlash from shareholders over a scheme which could have awarded senior leaders with up to £208million in share awards.
It came just two months after the company secured an extra £560million from the British government in November, which they said was needed to weather the coronavirus pandemic.
Its chief executive could receive £65million alone after investors holding just over 70 per cent of shares voted for the new long-term incentive plan.
The plan would have seen chief executive Mooky Greidinger get a £33million payout if Cineworld’s share price hit 190p within three years – back to levels it was at prior to the pandemic.
To unlock £65million it would have had to hit 380p.
Neither of these bars have been met by the company since April 2021.
Cineworld is expected to file a chapter 11 petition in the U.S. and is considering filing an insolvency proceeding in the U.K., they added.
The pandemic saw cinemas closed across the world during the pandemic due to the risk of the spread of coronavirus.
Some cinema companies were already struggling to retain audience numbers due to highly competitive online screening services.
It seems the reopening of cinemas has not helped improve visitor numbers, leading to major chains such as Cineworld coming under increasing financial pressure.
The British company only narrowly avoided bankruptcy in 2020 after last-minute support from creditors while its 800 branches were closed due to covid.
In a statement on the group’s website on Wednesday, the cinema owner said that recent audience figures were below its expectations, and it expected the company to suffer significant ‘dilution of equity interests’ in the near future: ‘Despite a gradual recovery of demand since re-opening 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.’
The statement continued: ‘In connection with these initiatives, the Group remains in active discussions with various stakeholders and is evaluating various strategic options to both obtain additional liquidity and potentially restructure its balance sheet through a comprehensive deleveraging transaction.
‘Any deleveraging transaction will likely result in very significant dilution of existing equity interests in Cineworld.’
The new development suggests any recovery the company had been hoping for as it entered crisis talks this week is not in sight.
Cineworld Group Plc has been contacted for comment.
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