Cineworld, the world’s second largest cinema chain, is preparing to file for bankruptcy after failing to see a quick enough recovery in movie-going since the end of the pandemic.
The London-listed business, which has run up debt of more than $4.8bn (£4bn) after losses soared while cinemas were shut during the global coronavirus crisis, has hired lawyers from Kirkland & Ellis and consultants from restructuring experts AlixPartners to advise on the process.
The company, which operates 751 sites in 10 countries including the Cineworld and Picturehouse chains in the UK, is expected to file a chapter 11 petition in the US and is considering insolvency proceedings in the UK, according to the Wall Street Journal.
The cinema chain had been hit particularly hard by successive Covid-19 lockdowns. The company has lost some 94 per cent of its share price value over the past 12-months as it sought a pandemic turnaround.
Cineworld, the world’s second largest cinema business, had been lumbered with £4bn worth of debt at the end of the last financial year.
In its latest trading update on Wednesday, Cineworld said: “Despite a gradual recovery of demand since reopening 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.”
Cineworld, which is facing an almost $1bn payout for pulling out of a deal to buy its Canadian rival Cineplex, reported a $493m year on year increase in net debt to $4.8bn at the end of 2021.
The group made a $708m loss last year. However, revenues more than doubled from $852m to $1.8bn, thanks to the latest James Bond and Spider-Man films. In 2020, the company reported a record $3bn loss.
“The firm will blame the lack of summer blockbusters as a reason behind its sharp downfall but in reality its aggressive acquisition plan has taken on too much debt and this was always a huge risk as interest rates rise,” said Walid Koudmani, chief market analyst at financial brokerage XTB.
“Moreover, the move to stay at home entertainment and streaming providers has created a pivotal shift in the way consumers enjoy films, and Cineworld simply has not adapted fast enough. It’s all quite sad as the UK’s high street will now likely lose a popular and familiar brand name.”
The company admitted about 95 million cinema-goers in 2021, up 75% on the 54 million in 2020 but well below the 275 million who attended before the Covid crisis.
The state of Cineworld stands in stark contrast to the performance of AMC Entertainment, the world’s largest cinema group and owner of the Odeon chain in the UK, which said the new Top Gun and Dr Strange films had fuelled a doubling of ticket sales in the US.