UUÂãÁÄÖ±²¥

On 22 August 2022, Cineworld Group plc (Cineworld) that it is currently considering its strategic options with regards to a restructuring of the business, including a possible voluntary Chapter 11 filing in the US—commonly known stateside as a . According to the world’s second-largest cinema chain, this would allow it ‘to access near-term liquidity and support the orderly implementation of a fully funded deleveraging transaction’. However, Cineworld also noted that it ‘would expect to maintain its operations in the ordinary course until and following any filing and ultimately to continue its business over the longer term with no significant impact upon its employees’.

This follows an earlier by the company on 17 August 2022, which set out the cinema chain’s current difficulties:

‘Despite a gradual recovery of demand since re-opening in April 2021, recent admission levels have been below expectations. These lower levels of admissions are due to a limited film slate that is anticipated to continue until November 2022 and are expected to negatively impact trading and the Group's liquidity position in the near term.

Consequently, the Group has been taking proactive steps to ensure it has the balance sheet strength and flexibility to adapt to market conditions. This includes significant previously disclosed operational and financial initiatives to manage costs and enhance liquidity. The Group believes these steps are required to optimize its ability to maximize enterprise value as part of the recovery in the cinema industry.

In connection with these initiatives, the Group remains in active discussions with various stakeholders and is evaluating various strategic options to both obtain additional liquidity and potentially restructure its balance sheet through a comprehensive deleveraging transaction. Any deleveraging transaction will likely result in very significant dilution of existing equity interests in Cineworld.’

Immediately following the disclosure of the 17 August 2022 announcement at 6am, °ä¾±²Ô±ð·É´Ç°ù±ô»å’s fell off a cliff, tumbling 60.4% from 20.80 pence per share to 8.24 pence per share by the end of the day. Since then, it has hit lows of 1.91 pence per share, before stabilising just below three pence per share. This comes after a general decline in the company’s share price during the coronavirus (COVID-19) pandemic, with Cineworld being demoted from the FTSE 250 on 21 March 2022 as part of the FTSE Russell Q1 2022 reshuffle (for more information, see: FTSE 350 Q1 2022 reshuffle—Ukraine conflict sees board exodus at Evraz and Polymetal as share prices plummet).

°ä¾±²Ô±ð·É´Ç°ù±ô»å’s for its FY 21, released on 17 March 2022, also provide little room for optimism. During the year, the company saw its net debt increase by US$492.7m (£417.8m) to US$4.8bn (£4.1bn) and its lease liabilities hit US$4bn (£3.4bn).

The cinema industry endured hardship throughout the coronavirus pandemic, as the temporary restrictions introduced to combat the virus took their toll on cinema numbers, with the closure of movie venues and subsequently limits imposed on capacity. However, Cineworld also suffered due to reasons unrelated to the coronavirus lockdowns and restrictions.

In December 2021, the Ontario Superior Court Cineworld to pay C$1.23bn (£800m) in damages to Cineplex inc (Cineplex) for allegedly breaching its obligations after it backed out of a deal to acquire the Canadian cinema chain. Cineworld has since declared that it intends to appeal this decision.

The company also received significant no votes (at least 20% opposition) against executive pay at its last two annual meetings, with 22.9% of shareholder votes cast against its remuneration report in , and 26.3% and 25.7% cast against its remuneration policy and remuneration report respectively in . The latter followed an earlier on 25 January 2021, which saw 30.8% and 29.9% of votes cast against °ä¾±²Ô±ð·É´Ç°ù±ô»å’s new remuneration policy and long-term incentive plan respectively (for more information, see: Dramatic scenes as a third of shareholders vote against remuneration).

This is not the first time that Cineworld has made preparations for a Chapter 11 filing. In November 2020, the company narrowly avoided bankruptcy after the cinema chain managed to over US$750m (£636.3m) in additional liquidity, including a new debt facility worth US$450m (£381.8m). It will be interesting to see whether Cineworld is again able to cobble together enough liquidity to keep it afloat, or whether this time in will be forced to go beyond plastering over the cracks and implement a more comprehensive restructuring.