By Geoffrey Smith
Investing.com -- Cineworld (LON:CINE), the world's second-largest operator of movie theaters, is set to emerge from chapter 11 bankruptcy proceedings in the U.S. after agreeing on a major debt restructuring and capital injections with its creditors.
Cineworld said on Monday that creditors representing over 80% of the claims against it have agreed to swap $4.53 billion in debt for equity. They will also inject another $800 million through a rights issue at a 25% discount to the implicit equity value of the new company.
In addition, they will provide the group with another $1.46B in new debt financing as the company exits chapter 11.
The company's existing shareholders will be wiped out completely by the agreement, as had been expected after the company's warnings over recent weeks.
Cineworld had collapsed under the weight of its debts when the pandemic forced governments around the world to close cinemas to stop transmission of COVID-19. The closure critically denied the owner of the Regal cinema chain the revenue it needed to service a growing debt burden after it borrowed heavily to acquire Canadian-based Cineplex. Its subsequent efforts to pull out of that deal were struck down by Canadian courts, leaving Cineworld with no way to escape its debts.
The recapitalization will fully repay the $1.94B debtor-in-possession financing agreed upon at the start of the chapter 11 proceedings.
The group is still in talks to sell its movie theaters outside the U.S., U.K., and Ireland.