Cineworld Lights Dim Despite Returning Crowds

Movie-goers have returned after the pandemic but it wasn't enough to save Cineworld from bankruptcy.

Cineworld Group, which owns Regal Cinemas in the US and the Picturehouse cinema chain in the UK, recently confirmed its plans for a Chapter 11 bankruptcy filing, opening perhaps the last chapter in its lately tumultuous history.

The company was rocked by the Covid-19 pandemic, which shuttered movie theaters in the spring of 2020. Suffering the sting of plummeting ticket sales, Cineworld sought to escape a $2.8 billion deal to buy Toronto-based Cineplex. But ultimately, the Ontario Superior Court of Justice ordered it to pay Cineplex more than C$1.2 billion (roughly $952 million) as part of a breakup fee.

“Cineworld had the very unfortunate timing of bidding for Cineplex right before the pandemic hit,” said Wedbush analyst Alicia Reese. “They could not follow through on that huge payment hovering over them for breaking that acquisition.”

The financial squeeze constrained Cineworld, which operates in 10 countries, just when competitors made forward-thinking investments. AMC Entertainment Holdings and Cinemark Holdings maintained strong loyalty programs and enhanced their theaters with more modern amenities, such as large-format screens, stadium seating and higher-tier concessions, Reese explains, and they were much quicker than Cineworld to reopen as the Covid threat faded. “Of course, AMC and Cinemark gained significant market share,” she said. 

Cineworld shares are now virtually worthless, having lost more than 99% of their value since 2019. Although CEO Mooky Greidinger hustled to keep his company out of bankruptcy, securing deals with lenders on at least two occasions during the past 18 months, it remains saddled with more than $9 billion in debt and lease liabilities.

“If they get rid of that overhang,” Reese noted, “their liquidity position would improve dramatically.” Meanwhile, attendance is slowly returning to pre-pandemic levels, with ticket sales for June down just 10% from June 2019, according to Comscore.