Cineworld, the world’s second-largest cinema chain, lamented the fact that it never managed to attain the meme stock status of its rival AMC as it filed for bankruptcy protection in the US after buckling under its debts.
The UK-based owner of chains including Regal Cinemas said in a filing on Wednesday that it was seeking to cut debt and shore up its balance sheet through a restructuring of its UK, US and Jersey business that is set to all but wipe out equity holders.
The company said it had been financially devastated by the closure of its cinemas during the pandemic as well as a dearth of new films to attract customers after it reopened.
In an accompanying declaration, the company’s deputy chief executive, Israel Greidinger wrote: “While Cineworld would, of course, have welcomed the liquidity of becoming a ‘meme stock’ like AMC, we were never so lucky!”
AMC, a Kansas-based cinema chain, had also faced bleak prospects but capitalised on its status as a meme stock by selling billions of dollars of new shares during the pandemic. Its share price had soared thanks to frenzied trading by retail investors active on Robinhood, the online stockbroker, who often discussed their favourite stocks on message board Reddit.
AMC chief executive Adam Aron recently contrasted the company’s good fortune with rivals that had not been able to raise enough cash to stay afloat.
The so-called first-day declaration tends to be a sober explanation of the reasons behind a company’s financial difficulties, but Greidinger used it to provide a colourful history of how his family started with a single theatre in Israel in 1930 that would become part of the modern Cineworld. It included several photos of the business during its early years alongside a candid explanation of how it eventually went wrong.
The company has secured a debtor-in-possession financing facility of almost $2bn from its lenders, which include US investment managers Invesco, Eaton Vance and State Street.
The lenders are expected to take control during the bankruptcy process. Cineworld said it would set out further restructuring plans “in due course”. Its London-listed shares will not be suspended.
A deal to reduce the group’s debt and lease liabilities, which amounted to almost $9bn at the end of 2021, would “result in very significant dilution of equity interests in the group”, said Cineworld, warning that “there is no guarantee of any recovery for holders of existing equity interests”.
The bankruptcy filing follows a years-long struggle with a debt pile incurred through expansion including the 2017 acquisition of Regal. Chief executive Mooky Greidinger twice agreed rescue packages with lenders to avoid bankruptcy during the pandemic.
The group’s London-listed shares have shed more than 90 per cent of their value over the past year as the group floundered, although they rose almost 10 per cent on Monday to 4.3p.
Mooky Greidinger said: “The pandemic was an incredibly difficult time for our business, with the enforced closure of cinemas and huge disruption to film schedules that has led us to this point.”
“This latest process is part of our ongoing efforts to strengthen our financial position and is in pursuit of a deleveraging that will create a more resilient capital structure and effective business,” he added.
Cineworld plans to discuss improving US cinema lease terms with landlords and said it expected to emerge from Chapter 11 during the first quarter of 2023. Employees will continue to be paid, while its chains, which also include Cinema City, Picturehouse and Yes Planet, will carry out business as usual.
Cineworld expanded rapidly into international markets under the Greidingers but has never succeeded in usurping US-based AMC as the world’s largest cinema chain.
Cineworld, which operates 747 sites and employs about 28,000 people globally, also faces a potential $1bn payout to Canadian rival Cineplex over an acquisition attempt that was abandoned in 2020. Cineworld is appealing against the decision in the Canadian courts.
It is not the only cinema group facing severe financial difficulties. Lenders to Vue International, the UK’s third-largest cinema chain, took control of the company in a £1bn debt restructuring in July. Meanwhile, AMC has more than $5bn of debt.