By Geoffrey Smith
Investing.com -- Cineworld (LON:CINE) stock fell to a new record low on Monday after the owner of the Regal chain of movie theaters confirmed it was looking at filing for chapter 11 bankruptcy protection, which would all but wipe out the current generation of shareholders.
"The strategic options through which Cineworld may achieve its restructuring objectives include a possible voluntary Chapter 11 filing in the United States and associated ancillary proceedings in other jurisdictions as part of an orderly implementation process," Cineworld said, confirming the essentials of a Wall Street Journal report on Friday. It said discussions are still ongoing with "many of its major stakeholders including its secured lenders and their legal and financial advisers."
The group said it would aim to maintain operations even if it does file for protection from its creditors, but noted that the deleveraging that would be required would result in "very significant dilution of existing equity interests".
Cineworld has been on the brink for two years, crippled by a pandemic that cut off its cash flows just as it needed them to service a number of debt-financed acquisitions. Its attempts to pull out of one such deal, for Canada-based Cineplex (TSX:CGX), led to it being ordered to pay the Canadian company the equivalent of $965 million in damages.
Cineworld, which has lost over $3.5 billion in the last two years and now has debt of over $10.5 billion, is appealing that award.
So far, the company has struggled to take advantage of the end of the pandemic and the reopening of its cinemas across the U.S., Europe and elsewhere. Last week, it warned that visitor numbers had fallen short of expectations due to a "limited film slate" that it expected to weigh on business at least through November
The company said its evaluation of its strategic options remains ongoing.
By 07:45 ET (11:45 GMT), Cineworld shares in London were down 21.6%, nearly worthless, having lost over 99% of their value from their 2019 peak.