Cineworld, the world’s second-largest movie theater chain, bemoaned the fact that it never managed to achieve meme status for its rival AMC’s shares, as it filed for bankruptcy protection in the US after retiring its debts.
The UK-based owner of chains including Regal Cinemas said in a filing on Wednesday that it is seeking to reduce debt and strengthen its balance sheet through a restructuring of its UK, US and Jersey operations that is set to all but wipe out shareholders.
The company said it was financially devastated by the closure of cinemas during the pandemic, as well as a lack of new films to attract customers after reopening.
In an accompanying statement, the company’s deputy chief executive, Israel Greidinger, wrote: “While Cineworld would of course welcome the liquidity to become a ‘meme stock’ like AMC, we’ve never been so lucky!
AMC, the Kansas-based movie theater chain, also faced a bleak outlook, but capitalized on its status as a meme stock by selling billions of dollars in new stock during the pandemic. Its share price has soared thanks to frenzied trading by retail investors active on Robinhood, an online stockbroker, who often discuss their favorite stocks on the Reddit message board.
AMC CEO Adam Aaron recently contrasted the company’s fortunes with rivals that have been unable to raise enough cash to stay afloat.
The so-called opening day declaration is usually a sober explanation of the reasons for the company’s financial difficulties, but Greidinger used it to provide a colorful history of how his family started a single theater in Israel in 1930 that would become part of the modern Cineworld. It includes several photos of the business during its early years, along with a candid explanation of how it eventually went wrong.
The company secured a nearly $2 billion debt financing facility from its lenders, which include US investment managers Invesco, Eaton Vance and State Street.
Lenders are expected to take control during the bankruptcy process. Cineworld he said he would outline further restructuring plans “in due course”. Its London-listed shares will not be suspended.
Group Downsizing Agreement debt and lease obligationswhich stood at almost $9bn at the end of 2021, “would result in a very significant dilution of the equity stake in the group”, Cineworld said, warning that “there is no guarantee of any recovery for existing equity holders”.
The bankruptcy filing follows a years-long struggle with debt piles built up through expansion, including the acquisition of Regal in 2017. CEO Mooky Greidinger has twice negotiated bailouts with lenders to avoid bankruptcy during the pandemic.
The group’s London-listed shares have shed more than 90 percent of their value in the past year as the group has floundered, although they rose nearly 10 percent to 4.3 percent on Monday.
Mooky Greidinger said: “The pandemic has been an incredibly difficult time for our business, with forced theater closures and massive disruption to film schedules that have brought us to this point.”
“This latest process is part of our ongoing efforts to strengthen our financial position and is looking for deleveraging that will create a more resilient capital structure and more efficient operations,” he added.
Cineworld plans to talk with owners about improving the lease terms of its US theaters and said it expects 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 on business as usual.
Cineworld expanded rapidly into international markets under the Greidingers, but was never able to usurp US-based AMC as the world’s largest cinema chain.
Cineworld, which operates 747 locations and employs about 28,000 people worldwide, also faces a potential $1 billion payout to Canadian rival Cineplex over an acquisition bid that was abandoned in 2020. Cineworld is appealing that decision in 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 $5 billion in debt.