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Cineworld, reeling under heavy debt this quarter and facing a dip in box office revenue, is exploring options, it asserted Friday as usual for the giant movie chain.
The announcement follows reports today that the UK parent of Regal Cinemas is preparing to file for bankruptcy. Cineworld earlier this week disclosed “active discussions with various stakeholders” to evaluate “various strategic options to obtain additional liquidity and restructure the balance sheet as a whole transfer transaction”.
“All our Cineworld and Regal theaters are open for business as usual, and we will continue to welcome our guests and members to our cinemas worldwide,” Cineworld added today.
“As we announced earlier this week, we are actively evaluating strategic options to ensure we have the balance sheet strength and flexibility to adapt to market conditions, and this process is ongoing. We are committed to our customer experience and being ‘the best place to watch movies.’
The high debt combined with soft box office revenue and possibly the Canadian Cineplex’s potential repayments is putting pressure on it. A Canadian court has awarded Cineplex $1 billion in a breach-of-contract lawsuit.
No one believes that bankruptcy means goodbye to Cineworld, but rather a thin and streamlined chain. Alamo Drafthouse (albeit a very small circuit) has been expanding rapidly since emerging from bankruptcy a year ago and is establishing a new breed of post-Covid theater experience.
The exhibit has a history of bankruptcy enforcement. In the year In the early 2000s, Regal merged with United Artists and Edwards Theatres, as they all went bankrupt after major expansions.
“We have seen such layoffs in the past. It is not about the death of the exhibition business,” said an industry executive.
The Chapter 11 discussion, first reported in the WSJ, is about whether cinema shares are hard, fair or not. Bad to date: National Cinemedia fell 8.7% to one dollar fifty. AMC Entertainment fell 7% to $17.91; Cinemark was off 4% at $16.35 and Imax and Marcus were down 3.2% at $15.76 and 1.61% at $17.25, respectively.
AMC suffered a drop in Mem shares today after prominent retail investor Ryan Cohen abruptly exited his stake in Bed Bath & Beyond, another among them. AMC itself narrowly avoided losses several times during the Covid period but its financial position is now very strong and on Monday it is set to launch a new selective securities business called APES.
The theater dies quickly at the signs of trouble.
“Speech is too much. There will be restructuring. Cineworld is not going out of business. Some underperforming theaters will be closed. Those properties are probably not that interesting for others to come and take. Cineworld will retain its best assets and its impact on the industry is likely to be minimal,” said Eric Wold, an analyst at B.Reilly Securities.
I guess we’ll have to see how much change lenders want. Maybe they will force some theaters to sell out. “Maybe they’ll try and split the business and try a Regal spin,” he said.
He and others say Cineworld is facing losses from overfilling its balance sheet with Regal, which it acquired for $3.6 billion in 2017 — meaning it’s a limited company.
“AMC has a lot of liquidity. Same goes for Cinemark and Marcus. The likelihood of these three going bankrupt anytime soon is very, very, very low. “What’s happening at Cineworld is self-sustaining because of its core structure,” Wold said.
Imax and National Cinemedia have more exposure – Imax because of the screens installed in Regal theaters. But restructuring means closing down the most underperforming theaters, and that’s not often where Imax theaters are located.
AMC, Cinemark and Marcus execs have all acknowledged a recent shortage of new wide-release studio production, but indicated on earnings calls that they may be dealing with a drought caused by production delays from August to September. This year, the audience has confirmed that they are willing to return to the theaters. It gives a chance to stop Black Adam, Black Panther: Wakanda Forever, And Example: Waterway It will be released in October, November and December.
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