Cineworld (CINE) shareholders will be wiped out after the beleaguered cinema giant said its restructuring plan would not “provide for any recovery for holders of Cineworld’s existing equity interests”.
The company has filed a reorganisation plan with a bankruptcy court in Texas as it battles to escape from Chapter 11 cases in the first half of this year, as per its existing plan. Cineworld entered Chapter 11 bankruptcy in the US last autumn as it floundered under a huge debt pile of almost $9bn (£7.2bn), including lease liabilities. Its market capitalisation is now down to £20mn.
The plan, which is intended to restructure the business and cut debt, is supported by lenders who control 83 per cent of Cineworld’s revolving credit facility, which is due this year, and term loans due in 2025 and 2026. A total of 69 per cent of outstanding debtors have backed the plan, according to the company.
Last week, Cineworld said that it expects a restructuring to reduce its debts by over $4.5bn, provide $1.5bn in new debt financing, and raise $800mn through a backstopped equity offering. The company also confirmed that it had terminated its marketing process for the potential sale of its assets in the US, UK, and Ireland.
IG Group chief market analyst Chris Beauchamp said that the company’s asset sale decision “seems odd given the pressing need to cut its debt pile, but with the outlook having brightened for the US and UK in recent months it makes [sense] to retain a key part of the business that will help drive cashflows once it emerges from bankruptcy”.
Cineworld shares fell by a quarter on the back of today’s update. The company’s cinemas have continued to operate as usual during the Chapter 11 and restructuring process – but this will provide little comfort to shareholders, who will have found proceedings very difficult to watch.
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