The Covid-19 pandemic dealt a massive blow to Cineworld’s operations. The leading cinema operator of the UK in terms of box office and revenue-based market share until 2018 had to close its cinemas temporarily in October 2020 across the UK, the US, and Ireland. Since then, Cineworld share price has drastically fallen to shallow levels. In May 2021, the cinemas reopened, but by October 2021, Cineworld was in tatters and filed for bankruptcy under Chapter 11 in the United States on September 07, 2021. Soon after filing for bankruptcy in the US, the cinema operator introduced proposals for business reorganization and exiting bankruptcy. It submitted a reorganization plan in the US to a bankruptcy court.
Cineworld Share Price is Going Downhill
While Cineworld is trying to turn around its fortunes with the latest reorganization proposals, there is no stopping the free-fall of the share price Cineworld. The downward movement of the share price has continued for the past year. The share price of Cineworld as on May 24, 2022, closed at 22.69 GBX with a trading volume of 5,055.754. And as on May 24, 2023, the Cineworld share price LSE closed at 1.079 GBX with a trading volume of 8,184.761. There is a high chance that the shareholders of the once-famous cinema operator are likely to be extinct amid the ongoing restructuring plans of the company.
Reorganization Plans
Cineworld is carrying a huge debt burden of $5 billion or £4 billion, and the restructuring plans include a blueprint of debt restructuring that describes how the company intends to deal with debt effectively. The plans also include a timetable of debt restructuring to enable the company to come out from Chapter 11 bankruptcy protections by June 2023.
Besides obtaining approvals from some creditors, the company also requires approval from the bankruptcy court, which considers the manner of restructuring of companies while they exit Chapter 11 protection. Cineworld claims that its plans support lenders who control and hold 83% of its loans due for repayment in the next two years in 2025 and 2026. It includes its revolving credit facility already due for repayment this year. The company also confirmed or received the backing of those controlling and holding about 69% of the debts.
Shareholders Beware
The high levels of existing debts and with more debts in the pipeline to support the restructuring plans mean that the restructuring leaves little room for the recovery of existing equity interests of Cineworld shareholders. In its survival attempt, the company is ready to sacrifice the interest of shareholders. Therefore people in the know of things have lost interest in Cineworld share price LSE.
Despite Cineworld share price hitting investors hard, Cineworld is keen to exit bankruptcy at the earliest by selling a part of its business. The company plans to raise $2.3 billion in new funding while shelving its plan to sell its business in the UK, US and Ireland. It has yet to receive any acceptable offers.
