Cineworld “Evaluating Strategic Options” As Admissions Dip Below Expectations, Soft Slate Ahead

Cineworld, the globe’s second largest exhibitor, today provided an update on its current trading, liquidity position and capital structure. The company, which also owns Regal in the U.S., said it is in “active discussions with various stakeholders and is evaluating various strategic options to both obtain additional liquidity and potentially restructure its balance sheet through a comprehensive deleveraging transaction.”

Should it move to deleverage, any transaction will likely result in significant dilution of existing equity interests in Cineworld. However, the group’s business operations are anticipated to remain unaffected and it expects to continue to meet its ongoing business counter-party obligations; while seeing no disruption to welcoming guests to its cinemas.

Exhibition has been one of the hardest hit sectors of the industry as Covid forced closures of cinemas across an agonizingly volatile and lengthy period for bosses, workers and audiences. Cineworld is not alone in assessing its future. Vue International is being restructured and AMC has been maneuvering to lessen survival risk.

Overall, box office has seen a great return with a robust summer — led by Top Gun: Maverick — but we’re currently in an easing phase as fallout from Covid continues to impact release dates; a bottleneck at VFX houses limiting big-ticket movies is not helping.

Said Cineworld, “Despite a gradual recovery of demand since re-opening 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.”

And, so, Cineworld “has been taking proactive steps to ensure it has the balance sheet strength and flexibility to adapt to market conditions.” The group has previously disclosed operational and financial initiatives to manage costs and enhance liquidity and says it believes these steps are required to “optimize its ability to maximize enterprise value as part of the recovery in the cinema industry.”
In March, Cineworld reported 2021 revenues of $1.805 billion. Operating profit also rebounded, reaching $15.8 million, up from a 2020 loss of $2.258 billion. The group overall recorded a $708.3 million pre-tax loss across the Covid-impacted year in which cinemas were closed for most of the first half. This was a substantial improvement on the 2020 loss of just over $3 billion.

At the time of reporting those results, the group also said it continues to maintain tight control over its operating costs and cash usage and “is in a good position to benefit from the expected industry recovery.”

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