Cineworld Group, the world’s second-largest cinema operator and the parent company of Regal Cinemas, has filed for Chapter 11 bankruptcy against creditors amid a severe box office downturn.
The London-based firm said on Wednesday that the company and its subsidiaries had commenced proceedings in the US Bankruptcy Court for the Southern District of Texas in an attempt to reduce its debts. Cineworld said it had secured $1.94 billion in new funding from existing lenders to ensure its continued operations during the reorganization and warned that restructuring its debt would lead to a “very significant dilution” of shareholder investments.
“The pandemic has been an incredibly difficult time for our business, with the forced closure of cinemas and a huge disruption to movie times that has gotten us to this point,” Cineworld chief executive Mooky Greidinger said in a statement. . “This latest process is part of our ongoing efforts to strengthen our financial position and targets deleveraging that will create a more resilient capital structure and an efficient business.”
The filing marks a dramatic retirement for Regal, which has been growing rapidly and has long been an iconic Southern California theater operator and also owns the Edwards and United Artists cinema brands.
But, like other theater operators, the movie giant has struggled to navigate the headwinds that have rocked the theater industry amid the COVID-19 pandemic and Hollywood’s rapid march towards streaming and watching movies at home.
Cineworld previously reported that it was exploring strategic options to deal with its substantial debt burden, as a promising start to the all-important summer movie season gave way to dramatically declining box office returns.
Hollywood productions such as “Top Gun: Maverick,” “Jurassic World Dominion,” and “Minions: The Rise of Gru” have brought throngs of patrons back to theaters, giving the industry a much-needed boost of confidence.
Lately, however, theater owners haven’t had much to celebrate.
Ticket sales fell dramatically in August after the lackluster debut of Sony Pictures’ Brad Pitt action flick “Bullet Train.”
There are few, if any, great all-ages movies coming from studios until October’s release of “Black Adam,” starring Dwayne Johnson as the DC Comics antihero. Several factors contributed to the thin release schedule, including COVID-19 production delays, a stall of unfinished films in visual effects houses, and the transition of many films to streaming services.
Theater owners have been hit hard by the pandemic, when government regulations forced movie theaters to close for months.
And Cineworld was facing a heavy debt load. He reported net debt of $10.35 billion as of June 22, or $5.16 billion excluding rental debt, according to the bankruptcy filing.
The company posted revenue of $1.8 billion last year, down from $4.4 billion in 2019, the year before the global public health crisis hit, regulatory filings show.
Cineworld said Aug. 17 that it was in “active discussions” with stakeholders to explore options for finding cash or restructuring its balance sheet.
“Despite a gradual recovery in demand since reopening in April 2021, recent admission levels have been below expectations,” the UK company said at the time. “These lower admissions levels are due to a limited film slate which is expected to continue through November 2022 and is expected to negatively impact trading and the group’s liquidity position in the near term.”
During its restructuring, the company said it plans to continue business as usual, with vendors, suppliers and employees being paid.
Cineworld plans to submit a reorganization plan to the court and exit Chapter 11 in 2023, he said. The plan includes renegotiating the cinema’s rental terms with its US owners, he said.
He said he expected his shares to continue trading on the London Stock Exchange.
This is not the first time that Regal has had problems with its creditors.
Regal Cinemas was founded in 1989 in Knoxville, Tennessee, and rode a wave of megaplex and multiplex construction in the 1990s.
As the industry faced a glut of giant theaters after years of overdevelopment, Regal declared bankruptcy in 2001 amid a wave of consolidation in the exhibition industry. Regal completed its Chapter 11 reorganization and emerged from bankruptcy in 2002 under the ownership of a group of investors led by billionaire Philip Anschutz, an LA Live developer with a state-of-the-art Regal multiplex.
In 2017, Regal agreed to be sold to Cineworld. The deal valued Regal at $3.6 billion.
Cineworld is not the first cinema operator to seek bankruptcy protection since the pandemic, but it is the largest to do so.
Pacific Theaters and ArcLight Cinemas filed for Chapter 7 bankruptcy last year to liquidate the holdings. Leases at the former ArcLight and Pacific theaters have been taken over by larger chains – including Regal, which took over the ArcLight at the Sherman Oaks Galleria last year.
Austin, Texas-based Alamo Drafthouse has filed for Chapter 11 bankruptcy protection, as has Dallas-based Studio Movie Grill. The two specialty channels then emerged from bankruptcy.
The aftermath of the pandemic has disturbed moviegoers in Los Angeles, the cinema capital of the world.
Laemmle Theaters relinquished the lease of its Playhouse 7 location in Pasadena, which was taken over by Landmark Theatres. Famous film destinations, the Cinerama Dome in Hollywood and the Vista Theater in Los Feliz, have been closed since March 2020 but are expected to reopen eventually.
AMC Theatres, the largest movie theater operator, also carries more than $5 billion in debt and faces the same box office climate as Regal.
However, an influx of very enthusiastic retail investors – colloquially known as “monkeys” – helped save Leawood company Kan. AMC strengthened its balance sheet by selling shares at high prices.
Times editor Anousha Sakoui contributed to this report.