Yahoo News Cineworld drops more than 50% on bankruptcy report
Britain's Cineworld Group (CINE.L), the parent company of Regal Cinemas, is preparing to file for bankruptcy after struggling to climb back from pandemic lows, according to The Wall Street Journal.
Share plunged on the news, down more than 50% in early morning trading.
The report added that the company, which acts as the world’s second largest cinema chain, has engaged lawyers from Kirkland & Ellis LLP and consultants from AlixPartners to advise on the bankruptcy process.
It is expected to file a chapter 11 petition in the United States and is considering filing an insolvency proceeding in the U.K.
Cineworld responded with the following statement to Yahoo Finance:
All of our Cineworld and Regal theatres are open for business as usual, and we continue to welcome our guests and members to our cinemas globally. As we announced earlier this week, we are proactively evaluating strategic options to ensure we have the balance sheet strength and flexibility to adapt to market conditions, and that process remains ongoing. We are committed to our customers’ experience and to being the “Best Place to Watch a Movie.”
The report comes after the company warned on Wednesday that a lack of big-budget movies will likely impact attendance through the fall, affecting its ability to cut debt.
The chain admitted it was in discussions with shareholders over a potential restructuring deal, adding that "any deleveraging transaction will likely result in very significant dilution of existing equity interests in Cineworld."
The stock fell to its lowest level following the announcement, plunging as much as 61% on the day.
Cineworld has run up debt of more than $4.8 billion after losses accelerated during the pandemic, according to the Guardian.
AMC (AMC) CEO Adam Aron responded to the news in a tweet on Thursday, writing that the theater chain is "quite optimistic and confident in our future" — despite Cineworld's woes.
AMC's stock is down about 30% year-to-date.
Yesterday, Cineworld/Regal (our next largest competitor) issued a fairly bleak prognosis for its near-term performance and liquidity. By contrast, at AMC, we are quite optimistic and confident in our future. Especially so because of our new APE security. Our statement today: pic.twitter.com/Z0t9XhALpZ
— Adam Aron (@CEOAdam) August 18, 2022
Alexandra is a Senior Entertainment and Food Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com
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