Cineworld, a struggling company, cancels plans to sell its overseas businesses

Today, the sale of Cineworld’s operations in Eastern Europe and Israel has been put on hold after it was determined that the bids were too low.

The company has decided to keep its US, UK, and Ireland core operations together for the time being, as it prepares to emerge out of bankruptcy protection.

Cineworld announced that it will “move ahead” with its proposed restructuring. This will include a debt for equity swap, whereby the lenders take control of their assets, along with an equity raise of $800,000,000 and new debt financing of $1,46 billion.

The group announced today that it has decided to end the marketing of its division “rest of the world”, despite receiving several proposals. This is because the “value level required by group’s creditors” was not met.

CVC Capital Partners, and Elliott Management have been rumoured as potential bidders to acquire Cineworld’s eastern European and Israeli operations. However, neither company has confirmed any interest.

In 2021, the company’s rest of world operations, which include Poland, Czech Republic, Slovakia Hungary, Bulgaria Romania, and Israel, will account for approximately 13 percent of its total revenue. However, they are not in bankruptcy protection.

Cineworld, behind AMC the second largest cinema chain in the world, filed for bankruptcy in the United States on September 15, after its struggles to control its debts were exacerbated by disappointing summer attendance numbers.

It was inevitable that the Chapter 11 bankruptcy would result in a debt for equity swap. However, in parallel to the bankruptcy proceedings it conducted “a marketing campaign in search of a transaction which maximized the value of the assets of the group”. It received interest from potential bidders such as AMC and Vue, but again, its lenders felt that the level of proposals was too low.

Cineworld is now going to proceed with Chapter 11 bankruptcy protection, as it has already received backing from lenders who hold about 83 percent of the principal loans.

Cineworld has reiterated what it said in February: the amount of debt that will be written off as part of the plan to save the group means that ordinary shareholders won’t have anything. The lenders will receive 100% of the equity.

The new $800 million equity will be raised through a rights offering to existing lenders. A new debt facility of $1.94 billion will be used to pay off a financing facility of that size, which was part of the Chapter 11 bankruptcy process.

The company stated that it continues to expect to emerge out of Chapter 11 in the first half of the year. However, it still needs to receive certain creditor approvals by the US Bankruptcy Court of the Southern District of Texas for the Houston Division to confirm the plan.

Cineworld was founded in 1995 and has more than 9,000 screens spread across 750 locations in 10 countries. After listing on the stock exchange in 2007, Cineworld completed a transformational deal in early 2018, to purchase Regal, the second-largest cinema chain in America for $5.8 Billion. However, this left it with an $8.9 Billion net debt, including lease liabilities.

Today, the company announced that “it continues to operate its global business as usual and cinemas without interruption”. Cineworld, its Regal, Cinema City and Picturehouse brands, and Planet will continue to “welcome” customers as usual to the cinemas. The group will also honor the terms of existing membership programs, including Cineworld Unlimted in the UK.