Cineworld has confirmed it is considering filing for bankruptcy in the US, as the cinema chain continues to struggle with $5bn worth of debt.
Shares in the London-listed company slumped more than 81 per cent to a record low of 1.8 pence after the WSJ said Cineworld is expected to file a Chapter 11 petition in the United States and is also considering insolvency proceedings in the UK.
In 2020, when the world was combating the pandemic, Cineworld battled to survive a coronavirus collapse in film-making and cinema-going as the lockdown kept viewers away from stepping out.
The company, which operates under Cinema City, Picturehouse, Regal and Yes Planet brands, has seen a shortage of big-budget films which has reduced admissions and cut the chances of a bounce back from the pandemic-lows.
But the company, which also owns the Picturehouse chain in the UK, insisted its cinemas “remain open for business” and that there would be “no significant impact” on jobs.
Cineworld employs more than 28,000 people globally. Like other cinema chains, Cineworld was hit hard by the pandemic.
Last week, AMC Entertainment Holding Inc (AMC.N) also flagged a tough third quarter due to a slim film slate. Its shares plunged 38% in early U.S. trading on Monday.
Cineworld shares, which hit a record low on Friday after the Wall Street Journal first reported its potential bankruptcy, were down 26% to 3 pence at 1340 GMT. That compares with a peak of more than 310 pence in 2017.
Cineworld, which had $8.9 billion of net debt at the end of 2021 and had already said it was looking at ways to restructure its balance sheet, confirmed on Monday one option was a voluntary Chapter 11 bankruptcy filing in the United States.
The group said it would aim to maintain operations even if it does file for protection from its creditors, but noted that the deleveraging that would be required would result in “very significant dilution of existing equity interests”.
Cineworld has been on the brink for two years, crippled by a pandemic that cut off its cash flows just as it needed them to service a number of debt-financed acquisitions.
Its attempts to pull out of one such deal, for Canada-based Cineplex (TSX: CGX ), led to it being ordered to pay the Canadian company the equivalent of $965 million in damages.
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