Cineworld mulls restructure as lack of blockbusters hits sales
By Frank Prenesti
Date: Wednesday 17 Aug 2022
(Sharecast News) - Film theatre chain Cineworld warned on Wednesday that a lack of big-budget film releases was hitting admissions at its cinemas and would persist until November, hitting trading and the group's liquidity.
"Despite a gradual recovery of demand since re-opening in April 2021, recent admission levels have been below expectations," the company said in a statement, adding that it was still in talks with parties over potential funding, or restructuring of its balance sheet "through a comprehensive deleveraging transaction"
Any deleveraging transaction would likely result in very significant dilution of existing equity interests in the company, Cineworld said.
The company's net debt jumped to $8.9bn at the end of 2021 from $600m a year earlier. It had pinned its hopes on a larger slate of blockbuster sequels such as James Cameron's Avatar 2 and Tom Cruise's Top Gun: Maverick.
However, the Covid pandemic has disrupted filming schedules, leading to lower output. Cineworld earlier this year said it was looking for new sources of cash to meet payment obligations to former shareholders of its US division Regal and a potential multi-million-dollar fine in a dispute with Canada's Cineplex.
The company said it expects operations to remain unaffected despite the near-term hit, and that it expects to meet its business counterparty obligations.
CMC Markets analyst Michael Hewson said the announcement was more unexpected given the recent update from US-based AMC Entertainment which said that the new Dr.Strange film and Top Gun: Maverick had seen ticket sales double, as American filmgoers had flocked back to the big screen.
"AMC also said that July saw the highest monthly attendance in US theatres since December 2019 as confidence returned. This raises the rather awkward question as to what AMC are doing well that Cineworld clearly aren't, as both can't be right?" he said.
"Either those two films were very popular, or they weren't, and if AMC saw record July admissions, Cineworld probably needs to ask why it didn't. That's the question shareholders need to pose to management."
"It was over a year ago that Cineworld management were facing shareholder revolts over a controversial pay and bonus scheme. Today's announcement is likely to reignite that debate and pose legitimate questions as to the competence of the current management."
Reporting by Frank Prenesti at Sharecast.com
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