The owner of the Cineworld chain and the Duke of York’s in Brighton has filed for bankruptcy protection in America to try to buy time to arrange a financial rescue package.
Cineworld said that its cinemas would stay open while the debt-ridden chain looked at ways to bounce back from its woes, caused in part by the coronavirus pandemic restrictions and a lack of popular recent films.
The business, the second largest cinema chain in the world, said today (Wednesday 7 September) that it had filed for “Chapter 11” bankruptcy protection in the US.
Chief executive Mooky Greidinger said: “The pandemic was an incredibly difficult time for our business, with the enforced closure of cinemas and huge disruption to film schedules that has led us to this point.”
Chapter 11 bankruptcies differ from other forms of declaring that a business has gone bust. They allow the company to hold on to its assets and trade as normal for the time being.
Cineworld said that it planned to emerge from bankruptcy in the first three months of next year. It is “confident that a comprehensive financial restructuring is in the best interests of the group and its stakeholders, taken as a whole, in the long term”.
But it will be painful for shareholders, whose positions in the business are likely to be heavily diluted during the process. Its shares will still keep trading in London, Cineworld told investors.
The bankruptcy will give the business a chance to hold talks with its landlords in America and ask for better deals.
Mr Greidinger said: “This latest process is part of our ongoing efforts to strengthen our financial position and is in pursuit of a de-leveraging that will create a more resilient capital structure and effective business.
“This will allow us to continue to execute our strategy to reimagine the most immersive cinema experiences for our guests through the latest and most cutting-edge screen formats and enhancements to our flagship theatres.
“Our goal remains to further accelerate our strategy so we can grow our position as the ‘best place to watch a movie’.”
The company added: “Cineworld and its brands around the world – including Regal, Cinema City, Picture House and Yes Planet – are continuing to welcome customers to cinemas as usual, which will not change during the Chapter 11 cases.
“The group expects to continue to honour the terms of all existing customer membership programmes, including Regal Unlimited and Regal Crown Club in the United States and Cineworld Unlimited in the UK.”
The problem for Duke is not “a lack of popular recent films” but iys no longer showing independent films.