After announcing the lifting of pandemic-related restrictions, Cineworld is struggling to attract moviegoers. Its balance sheet has also been strained by an order to pay $970M to Canadian rival Cineplex. And now, fears of bankruptcy are swirling. If the company files for bankruptcy, the effect could be far-reaching. The company has already hired bankruptcy specialists and will likely need more capital to address the issues.
Cineworld’s shares have plummeted over the last month as shareholders fret about a possible debt crisis. The company is considering its options to shore up its finances following the slump in ticket sales. While the company has attributed the poor performance to a reduced film slate, the looming threat of streaming services such as Netflix has been a long-standing concern. Netflix has spent hundreds of millions of pounds on film rights and is expected to continue to eat away at cinemas.
The cinema company has been struggling to attract filmgoers to its theaters over the past year, with admission levels falling below expectations. Though the company reopened its cinemas in April and has a limited film slate until November, the company’s balance sheet is already being squeezed by the recent Covid restrictions, which posed a significant risk to its business. In addition, the company has a $970 million lawsuit pending against it from the cinema chain Cineplex. Despite the court ruling, the company is appealing the decision and is putting its cinemas in jeopardy.
Though the company had lifted its pandemic lockdowns earlier this year, the lack of blockbusters and other blockbusters has hampered its admissions. Because of the lack of new blockbusters, Cineworld’s stock fell as much as 60% in mid-day trading in London on Friday. The company’s stock hit a record low of 1.8 pence per share. A bankruptcy filing is expected by the company in the near future.
Shares of Cineworld have plunged by more than 80% in London on Friday, as investors fear that it may soon file for bankruptcy. The company said it has engaged the services of bankruptcy experts to help it decide if a Chapter 11 filing is necessary. This type of filing allows a company to continue operations while negotiating with its creditors. Its net debt at the end of last year was around $4.8 billion.
With more than five billion in debt, Cineworld is struggling to turn a profit. In addition to its picture houses, the company operates the Cineworld and Picturehouse cinema chains in the UK. This pandemic has caused cinema operators to struggle to keep up with the demand for movies. However, Cineworld has a strategy to fight back by restructuring its balance sheet and raising additional liquidity. Bankruptcy could help the company access short-term liquidity, as well as enable the company to implement a deleveraging transaction in a timely fashion.
In the United States, Cineworld is expected to file a chapter 11 bankruptcy petition. In the UK, the company is considering an insolvency filing. It did not respond to a request for comment from CNBC. Cineworld operates about 9,000 movie theaters across ten countries. On Wednesday, the company warned that a lack of blockbusters was affecting admissions and that this situation would likely continue until November. The company also warned that the lack of blockbusters will affect its liquidity. Cineworld is the latest casualty in the movie theater industry. After coronavirus pandemic lockdowns, the industry has struggled to recover.
