Cineworld (LSE: CINE), the world’s second-largest cinema chain, has announced its intention to file for administration and suspend trading on the London Stock Exchange.
This move is part of a broader plan to restructure the company’s finances, which is expected to result in the release of approximately £3.55 billion of its funded indebtedness.
The proposed restructuring involves several key elements. Firstly, administrators will be called in to oversee the process. Additionally, there will be a rights offering designed to raise £630 million and the provision of £1.15 billion in new debt financing. These measures aim to provide Cineworld with a significant boost in liquidity to support its long-term strategy.
Under the restructuring plan, all of Cineworld’s assets will be transferred to a wholly-owned subsidiary named Crown. Furthermore, a newly incorporated company controlled by the group’s lenders will become the sole owner of Crown, effectively removing Cineworld Group’s interest in both Crown and the rest of the group.
While this restructuring holds the potential to transform Cineworld’s balance sheet and offer much-needed financial stability, it comes at a cost for existing shareholders. The company has stated that there will be no recovery for holders of Cineworld’s existing equity interests, implying that shareholders are likely to lose their investments as a result of the arrangements.
As a direct consequence of the administration process, the trading of Cineworld’s shares on the London Stock Exchange’s main market for listed securities will be suspended in July.
This news marks a significant development for Cineworld and its stakeholders. The company’s restructuring plan is an effort to address the financial challenges it has faced, particularly in the wake of the COVID-19 pandemic, which severely impacted the cinema industry.
