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The company announced on Wednesday that the indebted Cineworld Group and its subsidiaries had filed Chapter 11 claims in the United States Bankruptcy Court for the Southern District of Texas.
The organization, which is the owner of Regal Cinemas in the U.S., said in a statement that as part of the Chapter 11 cases, Cineworld would try to implement a de-leveraging transaction that will significantly reduce the Cineworld’s debt, strengthen its balance sheet, and give it the financial flexibility and strength to accelerate and capitalize on the Group’s strategy in the movie industry.
The Group Chapter 11 Companies enter the Chapter 11 claims with pledges from current lenders for a roughly $1.94 billion debtor-in-possession financing arrangement. This will help guarantee that Cineworld’s operations continue as usual while it undertakes its reorganization.
In an effort to better position the company for long-term growth, Cineworld will pursue a real estate optimization strategy in the United States and plans to collaborate with American landlords to optimize U.S. cinema lease terms. It further stated that it anticipated continuing to operate its global operations and movie theaters as usual.
It is anticipated that any de-leveraging transaction will cause a very considerable dilution of the Group’s existing stock holdings, the business stated in August, and there is no assurance that holders of existing equity interests will be compensated in any way. The business added that it does not anticipate that its shares will no longer be traded on the London Stock Exchange.
A complete financial reorganization, according to Cineworld, is in the long-term best interests of the company and its stakeholders. The company is expected to emerge from Chapter 11 during the first quarter of 2023.
For the year ending December 31, 2021, the firm reported a loss before taxes of $708.3 million, a significant improvement from the $3 billion loss in 2020. The Group’s net debt, excluding lease liabilities, rose from $4.33 billion to $4.84 billion, an increase of $492.7 million. In addition, Cineworld obtained $200 million in extra liquidity from incremental loans in July 2021.
The “amazing staff” at Cineworld, according to CEO Mooky Greidinger, is laser-focused on transforming the company to survive during the cinema industry’s recovery. However, he acknowledged how extremely challenging the epidemic was for the industry, particularly the forced shutdown of theaters and the significant interruption to film schedules that brought Cineworld to where it is now.
With 747 locations and 9,139 screens worldwide, Cineworld operates in 10 nations, including the United States and the United Kingdom.
The largest shareholder in Cineworld leaves
The largest independent shareholder in Cineworld has almost completely sold up its remaining holdings, only weeks after the troubled company acknowledged it might declare bankruptcy in the U.S.
The chain was previously linked to the covert Chinese businessman Liu Zaiwang, the head of the Jangho Group.
In recent days, it has decreased its position from 11.6% to 1.6%.
The action will dash any aspirations that Zaiwang could attempt to take over the failing business.
Israel and Mooky Greidinger, brothers, are in charge of Cineworld. After amassing enormous debts before the pandemic, when Cineworld was forced to close its movie theater complexes for extended periods, the two have brought the company dangerously close to bankruptcy.
Additionally, a failed acquisition of Canadian rival Cineplex resulted in an £800 million litigation expense for the company. It acknowledged last month that it needs additional money and is considering a significant financial restructuring to survive.
In August 2020, Zaiwang became a shareholder. He was the second-largest investor before the stock sale. Now he is sixth.