The owner of movie theatres, Cineworld Group LLC, has applied for Chapter 11 bankruptcy protection in the US as it struggles with massive debt and lower-than-expected moviegoer attendance in the Southern District of Texas in an effort to tame its $5 billion debt pile.
Cineworld will pursue “a real estate optimisation strategy in the US,” which may involve some theatre closures or sales, as well as “engaging in collaborative discussions with US landlords to improve US cinema lease terms.” Cineworld anticipates emerging from Chapter 11 in the first quarter of 2023.
The business stated the following today:
“Cineworld Group plc and its subsidiaries a leading cinema operator in 10 countries including the United States and the United Kingdom with 747 sites and 9,139 screens globally, today announced that Cineworld and certain of its subsidiaries (collectively, the “Group Chapter 11 Companies”) have commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of Texas.
As part of the Chapter 11 cases, Cineworld, with the expected support of its secured lenders, will seek to implement a de-leveraging 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 Group Chapter 11 Companies enter the Chapter 11 cases with commitments for an approximate $1.94 billion debtor in possession financing facility from existing lenders, which will help ensure Cineworld’s operations continue in the ordinary course while Cineworld implements its reorganisation.
Exhibition was one among the sectors most severely affected by the pandemic, with cinema theatres closing for months at a time. Additionally, a slew of tent poles that had boosted box office earlier this year tapered off into a weak slate for August and September.
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It incurred considerable debt when it paid $3.6 billion to buy Regal in 2018. The business didn’t enter Covid on solid financial ground, despite making some headway toward paying it off. At the end of 2021, there was $8.9 billion in total debt and liabilities. Separately, a Canadian judge found late last year that the business is responsible for more than $1 billion in damages due to the company’s decision to back out of a purchase of Cineplex.
While Regal will continue to operate, it’s possible that certain theatres may close and others will be acquired by different companies. For an overscreened United States, consolidation is viewed as a given, particularly if smaller chains begin to exhaust Covid relief funding.