Cineworld Shares Sink As It Plots $2.3bn Restructuring Following Asset Sale Failure

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Cineworld’s share price slumped on Monday as it announced a multi-billion-dollar restructuring package in an effort to stave off bankruptcy.

At 2.1p per share the leisure chain was 28% lower in start-of-week trading.

Cineworld said it was looking to raise $2.26 billion of new funding after failing to sell its operations in North America and the British Isles. The business launched a marketing process to hive off assets earlier this year.

Asset Sales Fail To Launch

The company said that, after discussions with key stakeholders, “it has determined that, absent an all-cash bid significantly in excess of the value established under the proposed restructuring, the marketing process as it relates to the group’s business in the US, the UK and Ireland will be terminated.”

However, Cineworld said that it will “continue to consider the proposals” for the sale of its operations in other territories. It said that it expects today’s $2.26 billion restructuring plan “will provide sufficient flexibility to accommodate a sale” of its ‘rest of the world’ business, assuming that any proposal is supported by its Chapter 11 companies and their shareholders.

Cineworld’s ‘rest of the world’ division comprises of theatres in Poland, Romania, Hungary, the Czech Republic, Bulgaria, Slovakia and Israel. In total the company operates more than 750 cinemas across the globe following its acquisition of US industry giant Regal Entertainment five years ago.

Restructuring Plan

Under its $2.26 billion fundraising plan announced today, Cineworld will receive $1.46 billion of fresh loans and provide lenders with $800 million of equity.

The company hopes the programme will reduce the amount of debt it owes to its lenders by $4.53 billion. It had net debt of $8.4 billion as of September.

Mooky Greidinger, Cineworld chief executive said that “this agreement with our lenders represents a ‘vote-of-confidence’ in our business and significantly advances Cineworld towards achieving its long-term strategy in a changing entertainment environment.”

The business said that “in light of the level of existing debt that is expected to be released under the Plan, the proposed restructuring does not provide for any recovery for holders of Cineworld’s existing equity interests.”

Cineworld entered Chapter 11 bankruptcy protection in the US in September as it struggled with its mountainous debts. The company spent heavily to expand its global footprint and then struggled to pay back borrowings as Covid-19 caused it to shutter its theatres.

Cineworld’s share price has slumped 99% since the beginning of 2020. As well as battling huge debts the company faces huge uncertainty as the growing popularity of streaming services damages box office sales.

Cineworld also faces damages of C$1.23bn ($960m) related to its collapsed acquisition of Canada’s Cineplex during the height of the pandemic. The British company has appealed agianst the Ontario Superior Court of Justice’s ruling of December 2021.

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