Cineworld Group Plc, the owner of Cineworld theaters in the United Kingdom and Regal cinemas in the United States, is apparently prepared to file for bankruptcy within the next few weeks as it struggles to recover from epidemic lows in attendance.
A person familiar with the matter informed the Wall Street Journal that the British movie firm has hired attorneys from Kirkland & Ellis LLP and consultants from AlixPartners to advise on the bankruptcy process.
It follows an announcement by Cineworld on Wednesday that its performance since April 2021 has been “below expectations.”
With 127 outlets in the United Kingdom alone, thousands of employment might be at stake.
Cineworld now employs 28,000 people across the United Kingdom, Ireland, Poland, the Czech Republic, Slovakia, Hungary, Bulgaria, Romania, Israel, and the United States.
Investors were required to save the business during the coronavirus epidemic, when all of its locations were forced to close. They placed 5,500 employees on unpaid leave and implemented both voluntary and mandatory layoffs. After the conclusion of the lockdown, the firm had counted on huge blockbusters to spur economic recovery; but, the pandemic made it difficult for the film industry to produce scheduled films on time.
Major films, such as Avatar 2 and Avatar 3, which were expected to be in theaters by now but have not yet debuted, have not yet reached box offices.
Long-awaited action thrillers like the newest James Bond film and Top Gun Maverick were also significantly delayed.
Top Gun Maverick was released in May of this year, about two years after its original release date of June 2020.
The newest Bond film starring Daniel Craig, No Time To Die, was pushed back by 18 months, from March 2020 to September of last year.
In January 2021, shareholders reacted negatively to a plan that might have given top officials with up to £208 million in share rewards.
It occurred just two months after the business won an additional £560 million from the British government in November, a sum they claimed was necessary to withstand the coronavirus epidemic.
Investors owning slightly more than 70% of the company’s shares voted in favor of the new long-term reward scheme, allowing the CEO to collect £65 million.
The agreement said that Cineworld’s CEO Mooky Greidinger would get a £33 million payment if the stock price returned to pre-pandemic levels within three years.
To unlock £65 million, the price needed to reach 380p.
Since April 2021, neither of these benchmarks have been satisfied by the firm.
Cineworld is anticipated to file a chapter 11 petition in the United States and is considering pursuing an insolvency case in the United Kingdom, according to these sources.
During the pandemic, theatres were shuttered across the world owing to the potential of coronavirus transmission.
Due to the fierce competition among online screening platforms, several cinemas were already struggling to keep their audiences.
It appears that the reopening of movie theaters has not resulted in an increase in attendance, putting large chains such as Cineworld under growing financial strain.
The British corporation nearly averted bankruptcy in 2020 with the assistance of its creditors at the last minute, however 800 of its outlets were shuttered owing to covid.
The cinema owner stated in a statement published on the group’s website on Wednesday that recent crowd counts fell short of forecasts and that the firm was likely to experience considerable ‘dilution of shareholder interests’ in the near future: ‘ Despite a gradual resurgence in demand since the reopening in April 2021, recent admission levels have fallen short of projections.
These reduced levels of admissions are attributable to a restricted film slate, which is scheduled to remain through November 2022, and are anticipated to have a negative impact on trading and the Group’s liquidity situation in the near future.
The statement continued, ‘In connection with these initiatives, the Group continues to engage in active discussions with various stakeholders and is evaluating various strategic options to obtain additional liquidity and potentially restructure its balance sheet through a comprehensive deleveraging transaction.
Any deleveraging deal will likely result in a substantial dilution of Cineworld’s existing equity interests.
The latest discovery shows that the company’s hoped-for revival is not in sight as it enters crisis discussions this week.
The Cineworld Group Plc has been reached out to for comment.
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