Cineworld on the verge of bankruptcy after the Covid crisis
VSineworld is preparing to file for bankruptcy after being hammered by a slump in ratings during the Covid crisis.
The world’s second-biggest cinema chain has hired lawyers and consultants ahead of possible claims in US and UK courts as it fights to stay afloat.
Shares of the London-listed company lost up to 80% of their value, falling to a new low of 1.8 pence before closing at 4.1 pence after the news was reported by the Wall Street Journal. It followed a 60% drop on Wednesday when the company announced it was in bailout talks with investors.
Chicago-based law firm Kirkland & Ellis has reportedly been asked to offer advice alongside New York consultancy AlixPartners. Cineworld declined to comment.
The company attributed the turmoil to disappointing box office sales, which strained its finances and made it harder to repay debt.
It is believed Cineworld could now file for Chapter 11 bankruptcy in a US court within weeks, with a UK insolvency case also pending.
In the UK, the chain employs thousands of people and operates 127 Cineworld and Picturehouse cinemas. Overall, it employs 28,000 people.
At the height of the pandemic, Cineworld temporarily closed its UK cinemas and furloughed 5,500 workers.
Philippa Childs, head of entertainment and media union Bectu, said: “This is very worrying news, especially for UK workers at Cineworld and Picturehouse who have already gone through a tumultuous time during the pandemic.
“The UK film industry has suffered an incredible blow due to Covid-19 and this latest news will be very troubling for film workers.
“We will do everything we can to support our members during this difficult time and will look to Cineworld to mitigate the impact of any bankruptcy settlement on its employees.”
Asked about the information, a Cineworld spokesperson said, “We have nothing to add beyond the statement we made on Wednesday.”
The business posted a loss of $708m (£599m) last year, compared to a loss of $3bn in 2020, even after sales were boosted by the release of new films from James Bond and Spiderman.
At the same time, the company – which must pay $1 billion to exit its takeover of Cineplex in Canada – added $493 million to its debt, bringing the total to $4.8 billion.
Cineworld’s warning on Wednesday said ticket sales had been “below expectations”, despite the release of blockbusters such as Top Gun: Maverick and Thor: Love and Thunder, and that disappointing future line-up meant that unease could continue until November.
The company stressed that its activities were continuing as usual.
Cineworld has warned shareholders to expect a “very significant dilution” of their holdings if it succeeds in hammering out a bailout deal.
Cineworld was founded by Steve Wiener and opened its first cinema in Hertfordshire in 1996.
The business grew into one of the UK’s largest cinema chains before merging with Cinema City International in 2014, a Greidinger family-controlled group with roots in Israel.
Three years later, US giant Regal took control for £2.7bn, creating the world’s second largest cinema group.
However, Cineworld chief executive Mooky Greidinger recently revealed his fears for the company.
Speaking at a hearing in an Israeli court over a dispute over local distribution, he said the company’s future “is not certain”.
According to local media, he said: “We have been an unprecedented achievement.
“I don’t think there are many Israeli companies that have achieved a status similar to the second largest cinema chain in the world.
“But two and a half years ago, our life’s work fell apart. For two and a half years, because of Covid-19, I have been fighting every day to save what we have built.
“I hope we will succeed but it is not certain.”