The London-listed company, which has more than $4.8 billion in debt after losses soared during the pandemic, said that despite the success of blockbusters such as Top Gun: Maverick, starring Tom Cruise, not enough movies in theaters. In a stock exchange filing, Cineworld said it was in “active discussions with various stakeholders” and was evaluating strategic options to obtain additional liquidity and potentially restructure its balance sheet to reduce debt. “Any deleveraging transaction would likely result in a very significant dilution of existing equity holdings in Cineworld,” the chain warned. Cineworld’s market value fell to just over £100m on Wednesday, having been valued at £4.4bn before the pandemic, but hurt the live cinema industry as investors reacted to the company’s continued precarious financial situation to be active. A debt-for-equity swap deal is likely to effectively wipe out the stake held by investors, including chief executive Mooky Greidinger and his family, who control 20% of the business. The Griedinger family, including Mooky’s brother and deputy chief executive Israel, has struggled to retain control of the troubled business but has been forced to reduce its stake from 28% in recent years. Cineworld’s top five investors include China’s Jangho Group with 13.8%, Polaris Capital Management (7.82%), Aberdeen Standard Investments (4.98%) and Aviva Investors (4.88%). In July, lenders took control of Vue International, the UK’s third-biggest cinema chain, as part of a £1bn debt restructuring deal that wiped out its owners’ shares. The dire state of Cineworld’s finances means a £208m executive incentive scheme introduced last year to capitalize on the upturn in the cinema industry is unlikely to materialise. The scheme is designed to reward the company’s senior executives if Cineworld’s share price recovers to £1.90p by 2024, with the Greidinger brothers receiving £33m each. If the shares hit £3.80, the total payouts would reach £208m, with the brothers receiving £65m each. However, after investors were spooked by Wednesday’s surprise announcement, the company was trading at just over 8p – a pre-pandemic level of £1.97. Cineworld operates 751 sites with 9,000 screens in 10 countries, including Cineworld and Picturehouse screens in the UK and Ireland, Yes Planet in Israel and Regal cinemas in the US. Subscribe to Business Today Get ready for the business day – we’ll point you to all the business news and analysis you need every morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. “Despite a gradual recovery in demand since reopening in April 2021, recent admission levels have been below expectations,” Cineworld said. “These lower levels are due to a limited film schedule which is expected to continue until November 2022 and is expected to adversely affect the group’s trading and liquidity position in the short term.” While theaters are expected to benefit from movies like James Cameron’s Avatar sequel later this year and Marvel releases including Thor: Love and Thunder, Hollywood has released fewer movies than in a typical summer. This is due to the negative effect of filming disruptions due to the pandemic, as well as films in certain medium-budget genres, such as romantic comedies, which are often released directly to streaming services. The company received an estimated 95 million viewers in 2021, up 75% from 54 million in 2020, but well below the 275 million watched before the Covid crisis. “The group has taken proactive measures to ensure it has the balance sheet strength and flexibility to adapt to market conditions,” the company said. “The group’s business activities are expected to remain unaffected by these efforts and Cineworld expects to continue to meet its ongoing counterparty business obligations.” Cineworld, which faces paying nearly $1 billion to pull out of a deal to buy Canadian rival Cineplex, reported a $493 million year-over-year rise in net debt to $4.8 billion at the end of 2021. The group made a loss of $708 million last year. However, revenue more than doubled from $852 million to $1.8 billion, thanks to the latest James Bond and Spider-Man films. In 2020, the company reported a record loss of $3 billion. The warning from Cineworld was in stark contrast to the performance of AMC Entertainment, the world’s biggest cinema group and owner of the Odeon chain in the UK, which said new films Top Gun and Dr Strange had fueled a doubling in ticket sales in the USA. . The company, which has a market value of $12.8 billion, said July had the highest monthly attendance at U.S. theaters since before the pandemic. “This raises the rather uncomfortable question of what AMC is doing well that Cineworld clearly isn’t, as they both can’t be right,” said Michael Hewson, chief analyst at CMC Markets. “Either those two films were very popular, or they weren’t. And if AMC saw record admissions in July, Cineworld probably has to ask why it didn’t. That’s the question shareholders should be asking management.”
