London-based Cineworld Group, the world’s second-largest movie theater operator, filed for Chapter 11 bankruptcy last week after months of minimal turnout at the box office.
Bankruptcy processes were begun in the Southern District of Texas as the parent company of Regal Cinemas sought to minimize its debt.
The attempt was successful, and Cineworld secured $1.94 billion in new funds from investors. The company assured lenders and investors that the company would continue operations while reorganization took place. The company’s restructuring will lead to a “very significant dilution” for shareholders and their investments.
“The pandemic was an incredibly difficult time for our business, with the enforced closure of cinemas and huge disruption to film schedules,” Cineworld Chief Executive Mooky Greidinger explained in a statement.
Greidinger said the goal of the bankruptcy was to strengthen its financial position and added that the company was “in pursuit of a de-leveraging that will create a more resilient capital structure and effective business.”
Regal Cinemas was prominent throughout Southern California as a primary movie theater chain, alongside competitors Edwards and United Artists. COVID-19 played a significant role in the decline of theater patrons and the drop in Regal Cinemas ticket sales.
Like many theaters, Regal struggled to maintain a profit once it reopened. Moviegoers had adapted to streaming movies, including new releases, from the comfort of their own homes. In return, movie theaters suffered.
Trying to get people back in theaters, studios released tentpole films to drive sales. These included movies such as Top Gun: Maverick and Bullet Train.
While such films helped bring moviegoers back, Cineworld nevertheless “faced a serious debt burden of $10.35 billion as of June 22, 2022.” Cineworld lost almost $3 billion in revenue from the pandemic and has yet to bounce back.
Regal Cinemas faced business struggles a few decades back, in the 90s, when multiplexes began to pop up all over the country. Challenged to keep up with development, they filed for Chapter 11 in 2002.
Regal Cinemas was able to bounce back and, in 2017, was sold to parent company Cineworld. While Cineworld is far from the only theater company to file for bankruptcy since the pandemic, they are the largest to do so.
Competitor AMC, the largest theater operator in the United States, is dealing with around $5 billion in debt due to box office struggles.
“Despite a gradual recovery of demand since reopening in April 2021, recent admission levels have been below expectations,” Cineworld said. “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.”
As a part of the court’s agreement with the bankruptcy filing, Cineworld will file a new plan with a laid-out reorganization structure in early 2023. The plan will detail how employees, suppliers, vendors, and the like will be paid.
It will also address how the company plans to handle the renegotiations of lease agreements with U.S. theater spaces. Cineworld will remain a public company with shares traded on the London Stock Exchange.