Cineworld Group (OTC: CNWGQ), the world's second-largest theater chain and the parent company of Regal Theaters, has filed for Chapter 11 bankruptcy in the United States. The London-based company first took on major debt when it paid $3.6 billion to purchase Regal in 2017, and that debt grew significantly during the pandemic.
"The pandemic was an incredibly difficult time for our business, with the enforced closure of cinemas and huge disruption to film schedules that has led us to this point," Cineworld's chief executive Mooky Greidinger said in the filing. "This latest process is part of our ongoing efforts to strengthen our financial position and is in pursuit of a de-leveraging that will create a more resilient capital structure and effective business."
Along with pandemic lockdowns, theater chains across the board have suffered from the transition away from cinema-viewing and towards streaming at home.
The company had a market value of roughly $68 million as of end-of-day on September 7, and it's more recent earnings report showed a loss of $565.8 million. According to Reuters, at the end of 2021, Cineworld had a net debt of $8.9 billion, with roughly half of that figure being made up of lease liabilities. Part of Cineworld's restructuring plan involves instituting a new "a real estate optimisation strategy" with U.S. landlords.
Chapter 11 allows businesses like Cineworld to reduce their debts through restructuring while continuing to operate. According to the filing, Cineworld has $1.94 billion in debtor-in-possession financing to fund its continued operation during the bankruptcy process.
The theater chain said that it expects to pay back all vendors in full as a part of the process and plans to emerge from bankruptcy in the first quarter of next year. The company also said that employees will continue to receive their usual wages.
However, while Cineworld says that trading on its shares probably won't be suspended, there's no guarantee that current equity holders will be able to recover their investments.
Cineworld operates theaters in more than 10 countries and has 28,000 employees to work its more than 9,000 total movie screens.
Prior to the pandemic, Cineworld entered talks to acquire Canadian theater company Cineplex, but is later bailed on the deal. Now, the Canadian chain is suing Cineworld for $946 million in damages and says it will review the bankruptcy filing for support of its claims.