There might be some hope for Cineworld! This is news that will be hitting the financial markets later today, and it comes from sources who state the chain is potentially looking at options to restructure internally in order to save itself from extinction. These are what we referred to in the title of this article as Cineworld’s “rescue talks”. After the lockdowns and the Covid-19 pandemic, along with stuttering starts to the summer with a schedule very short of blockbusters (outside of Top Gun: Maverick, which is almost in its 12th week), the company’s been having financial difficulties.
Cineworld is also still battling a court case after having pulled out of its takeover of the Canadian chain Cineplex in 2020. All this to say that Cineworld has been having quite a bit of bad luck of late. The company now finds itself in dire straights. But, there might be light at the end of the tunnel.
Could Cineworld be saved thanks to these ‘rescue talks’?
Credit: lovebelfast.co.uk
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As we’ve seen nationwide with cinemas, despite the success of the box office, we are still looking at around a 20% drop from 2019 levels in admissions and revenue. Cinemas now face practically speaking a weak slate of new movies until Christmas, and Cineworld informed shareholders earlier today that this will “negatively impact trading” and their own liquidity as a result.
After dodging bankruptcy for the second time in 24 months, the chain is now going on the offensive. If their plans get the go-ahead, shareholders will see a “very significant” dilution.
CINE worth 8p per share
Credit: Cineworld
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The share price dropped to just 8p after the close of the FTSE today. Once this news hit the market, there was then a 60% drop in price. This means the company, which owns close to £5 billion in debts, now has a market cap of just £115m. This isn’t good news.
What are the options for Cineworld?
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Debt for Equity
A debt for equity swap is probably most likely for Cineworld. This means creditors take some ownership of the company in response, meaning that instead of owing debt, they’ll repay with shares.
A Cineplex agreement
One thing hanging over Cineworld currently is their proposed takeover of Cineplex. After backing out of the deal, Cineplex took them to court and won. Cineworld is appealing the verdict, but if they lose again, it’ll result in a substantial financial cost for the company. This news could be a way of forcing an agreement with Cineplex which would result in both companies coming out with a win.
A Shareholder Wipe Out
Sales, the chain could look to offload some sites or parts of the company to other suitors. However, in the climate, this could be troublesome.
More debt to aid survival
One final possibility could be an extension of credit lines to keep the company going for the next few months. That’s something that could really end up saving the company for a short while. However, with an incoming cost of living crisis in the UK, which is going to have a significant effect on companies in the country, it does look like Cineworld will need quite a bit of credit.
What’s next for Cineworld in their own movie-like storyline? I suppose we’ll see.
What do you make of the news? Do you think that Cineworld could be saved from bankruptcy? Let us know in the comments below, we’d love to hear from you.
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