(LONDON) The British cinema group Cineworld announced on Monday a plan to raise 2.26 billion dollars, reduce its debt and emerge from bankruptcy proceedings in the United States, but confirmed that its shareholders will suffer heavy losses.
The group has entered into a “contingent agreement” with its largest creditors, which will include “receiving shares in the reorganized group” in exchange for “debt reduction […] of approximately $4.53 billion” , Cineworld announced in a press release.
Cineworld, weighed down by $8.8 billion in debt according to figures as of the end of June 2022, will also receive $2.26 billion in new funding, including $800 million through an equity issue and the rest through new loans.
Cineworld hopes to emerge from bankruptcy proceedings in the United States “in the first half of the year”. But the plan announced on Monday must still be formally validated by a number of creditors and the American courts, in particular.
In addition “the proposed restructuring does not provide for any recovery” for the current shareholders, specifies Cineworld, which had already warned on several occasions of potential heavy losses for the holders of shares.
Consequence: its title fell 31.03% to 2 pence on the London Stock Exchange around 5:10 a.m. (Eastern time). It has lost 90% of its value over the past year.
Cineworld, which filed for bankruptcy in early September in the United States, has struggled to bounce back from the COVID-19 pandemic and lengthy theater closures.
Since then, Cineworld has been in discussions with its main stakeholders to put in place a reorganization plan, but has also carried out a process to sell the group in parallel. He received proposals for all or part of the company.
Cineworld said on Monday it would eventually back out of divesting its US, UK and Ireland operations unless an offer “significantly exceeds” the value of the restructuring plan, but remains open to the sale of its activities in the rest of the world.
The group has ensured that its activities will continue without interruption during its reorganization thanks in particular to the liquidities made available by its creditors.
The group manages more than 9,000 screens at 751 sites in 10 countries, notably under the Cineworld and Picturehouse brands in the United Kingdom and Ireland, and Regal Cinemas in the United States.
In addition to the devastating impact of the pandemic, it suffered from a frenzy of acquisitions which led it to accumulate mountains of debt, in particular to pay for the purchase of the American chain Regal.