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Cineworld lenders call in advisers on £6bn debt pile - report
5th Oct 2020 12:54
(Sharecast News) - Lenders to Cineworld Group have called in advisers for urgent talks on the company's £6.2bn debt mountain as it announced the shuttering of 663 cinemas on both sides of the Atlantic.
A syndicate of banks has appointed FTI Consulting to negotiate with the stricken multiplex operator following a pitch process last week, Sky News reported citing unnamed sources.
The move, which sent shares in the troubled chain plunging by more than 50%, was likely to presage a formal debt restructuring, the report stated.
Lenders were reportedly also expected to raise the prospect of a company voluntary arrangement, an insolvency mechanism that would pave the way for some permanent closures.
Cinema operators have been hity hard by the length of the coronavirus crisis, with the delay to key film releases seen as a tipping point for the industry's finances.
No Time To Die, Daniel Craig's final outing as James Bond, was due to open next month but has been pushed back by MGM, the studio behind it, until next April.
Cineworld cited an "increasingly challenging theatrical landscape and sustained key market closures" adding that the move would hit 536 Regal theatres in the US and 127 Cineworld and Picturehouse theatres in the UK.
The plunging share price will also hit the family of chief executive Moshe Greidinger, as it owns a one-fifth stake in the business via Global City Theatres, a holding which was refinanced as recently as September.
"As major US markets, mainly New York, remained closed and without guidance on reopening timing, studios have been reluctant to release their pipeline of new films," Cineworld said in a statement.
"In turn, without these new releases, Cineworld cannot provide customers in both the US and the UK - the company's primary markets - with the breadth of strong commercial films necessary for them to consider coming back to theatres against the backdrop of Covid-19."
AJ Bell investment director Russ Mould said the the £1.6bn debt pile it inherited with the £2.3bn 2018 purchase of Regal was now "crushing the group".
"While no-one could have foreseen a pandemic, its duration or its impact upon major leisure groups, Cineworld was already facing the threat of streamed content from Netflix, Amazon and others. As a result of the Regal deal it doubled-down and increased its exposure to unpredictable film release schedules that had themselves become increasingly reliant upon a few smash-hit franchises, such as Marvel's super-hero series and Star Wars."
"Cineworld left itself more exposed to any unexpected downturn in trading than would have otherwise been the case. The results for the first-half of 2020 show cash balances of $285m, set against borrowings of $4.2bn and lease liabilities of a further $4.3bn and in the first six months of the year lease payments of $166 million easily outstripped interest payments of $41m."
"There will doubtless be more than a few nervous commercial property landlords looking at Cineworld's decision to mothball 763 cinemas in the UK and USA, in addition to 45,000 very concerned employees.
A syndicate of banks has appointed FTI Consulting to negotiate with the stricken multiplex operator following a pitch process last week, Sky News reported citing unnamed sources.
The move, which sent shares in the troubled chain plunging by more than 50%, was likely to presage a formal debt restructuring, the report stated.
Lenders were reportedly also expected to raise the prospect of a company voluntary arrangement, an insolvency mechanism that would pave the way for some permanent closures.
Cinema operators have been hity hard by the length of the coronavirus crisis, with the delay to key film releases seen as a tipping point for the industry's finances.
No Time To Die, Daniel Craig's final outing as James Bond, was due to open next month but has been pushed back by MGM, the studio behind it, until next April.
Cineworld cited an "increasingly challenging theatrical landscape and sustained key market closures" adding that the move would hit 536 Regal theatres in the US and 127 Cineworld and Picturehouse theatres in the UK.
The plunging share price will also hit the family of chief executive Moshe Greidinger, as it owns a one-fifth stake in the business via Global City Theatres, a holding which was refinanced as recently as September.
"As major US markets, mainly New York, remained closed and without guidance on reopening timing, studios have been reluctant to release their pipeline of new films," Cineworld said in a statement.
"In turn, without these new releases, Cineworld cannot provide customers in both the US and the UK - the company's primary markets - with the breadth of strong commercial films necessary for them to consider coming back to theatres against the backdrop of Covid-19."
AJ Bell investment director Russ Mould said the the £1.6bn debt pile it inherited with the £2.3bn 2018 purchase of Regal was now "crushing the group".
"While no-one could have foreseen a pandemic, its duration or its impact upon major leisure groups, Cineworld was already facing the threat of streamed content from Netflix, Amazon and others. As a result of the Regal deal it doubled-down and increased its exposure to unpredictable film release schedules that had themselves become increasingly reliant upon a few smash-hit franchises, such as Marvel's super-hero series and Star Wars."
"Cineworld left itself more exposed to any unexpected downturn in trading than would have otherwise been the case. The results for the first-half of 2020 show cash balances of $285m, set against borrowings of $4.2bn and lease liabilities of a further $4.3bn and in the first six months of the year lease payments of $166 million easily outstripped interest payments of $41m."
"There will doubtless be more than a few nervous commercial property landlords looking at Cineworld's decision to mothball 763 cinemas in the UK and USA, in addition to 45,000 very concerned employees.