The second largest chain of cinemas on the planet, Cineworld, has filed for special bankruptcy in the US in a bid to buy time to restructure its business.
The business said on Wednesday that it had filed for a Chapter 11 proceeding in the US, but its cinemas will stay open throughout the period.
It is designed to allow the debt-ridden chain the chance to bounce back from its current woes, caused in part by the pandemic and a lack of popular recent films.
Cineworld owns and operates the Renfrew Street branch in Glasgow – the tallest cinema complex in the world.
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.”
Although sounding dramatic, Chapter 11 bankruptcies are quite different from other forms of declaring that a business has gone bankrupt. They mean the company will be able to hold on to all its assets and trade as normal for the time being.
Cineworld said it plans 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 renegotiate with its landlords in the US 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.”