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Cineworld raises $213m, seeks higher debt limit after $3bn loss
25th Mar 2021 07:01
(Sharecast News) - Cineworld said it had has secured extra funding and was looking to lift debt limits after a huge annual loss due to the Covid-19 pandemic, while also warning any tightening of restrictions would force it to seek further cash.
The company on Thursday reported a pre-tax loss of $3bn, compared with a profit of $212m a year earlier as revenue collapsed to $852m from $4.3bn in 2019. Cineworld earlier this week said it planned to re-open US cinemas on April 2 and in May for the UK.
It also announced a binding commitment from a group of institutional investors for a new $213m convertible bond due in 2025 and said it would ask for shareholder approval to temporarily suspend the company's borrowing limit.
"There can be no certainty as to the future impact of Covid-19 on the group. Governments strengthening of restrictions on social gathering may lead to closure of cinemas or studios delaying movie releases. This would have a negative impact on the group's financial performance and likely require the need to raise additional liquidity," Cineworld said.
Cineworld expect "strong pent-up demand for affordable out-of-home entertainment" post re-opening due to the pandemic "as indicated by the theatrical industry performing well in re-opened markets such as China, Japan and Australia".
The company closed its UK and US cinemas in October as studios delayed major box office releases. Analysts have expressed concerns about the pace of recovery in the industry with more people turning to streaming services for their entertainment while stuck at home during lockdowns.
Cineworld also signed a multi-year deal reached with Warner Bros for the exclusive right to show the studio's films for 45 days in the US and 31 days in the UK - with an option to extend to 45 days for films that open to an agreed box-office threshold.
"Whether that limited window of exclusivity is long enough to lure back fans eager to watch new releases on a big screen once again isn't clear," said Hargreaves Lansdown analyst Susannah Streeter.
"A swift recovery will be crucial given that the company is saddled with high levels of debt, but there are fears some people may have got a little too comfortable watching releases from their sofas."
"Consumers have been paying a fixed fee to rent new releases and a higher price to buy the film for repeat viewings. This is likely to capture the family market, who will consider that renting or buying a new release at home, will work out cheaper than a night out for everyone at the movies."
The company on Thursday reported a pre-tax loss of $3bn, compared with a profit of $212m a year earlier as revenue collapsed to $852m from $4.3bn in 2019. Cineworld earlier this week said it planned to re-open US cinemas on April 2 and in May for the UK.
It also announced a binding commitment from a group of institutional investors for a new $213m convertible bond due in 2025 and said it would ask for shareholder approval to temporarily suspend the company's borrowing limit.
"There can be no certainty as to the future impact of Covid-19 on the group. Governments strengthening of restrictions on social gathering may lead to closure of cinemas or studios delaying movie releases. This would have a negative impact on the group's financial performance and likely require the need to raise additional liquidity," Cineworld said.
Cineworld expect "strong pent-up demand for affordable out-of-home entertainment" post re-opening due to the pandemic "as indicated by the theatrical industry performing well in re-opened markets such as China, Japan and Australia".
The company closed its UK and US cinemas in October as studios delayed major box office releases. Analysts have expressed concerns about the pace of recovery in the industry with more people turning to streaming services for their entertainment while stuck at home during lockdowns.
Cineworld also signed a multi-year deal reached with Warner Bros for the exclusive right to show the studio's films for 45 days in the US and 31 days in the UK - with an option to extend to 45 days for films that open to an agreed box-office threshold.
"Whether that limited window of exclusivity is long enough to lure back fans eager to watch new releases on a big screen once again isn't clear," said Hargreaves Lansdown analyst Susannah Streeter.
"A swift recovery will be crucial given that the company is saddled with high levels of debt, but there are fears some people may have got a little too comfortable watching releases from their sofas."
"Consumers have been paying a fixed fee to rent new releases and a higher price to buy the film for repeat viewings. This is likely to capture the family market, who will consider that renting or buying a new release at home, will work out cheaper than a night out for everyone at the movies."