Cineworld rises 11% as US court grants access to $785 million in funding

Cineworld has said it plans to emerge from bankruptcy in the first three months of next year. Photo: Phil Noble/Reuters

Shares in Cineworld ( CINE.L ) rose as much as 11% on Friday before falling slightly after a US court granted it access to $785m (£677m) in funding.

The world’s second-largest movie theater chain filed for special bankruptcy in America this week to help it restructure $9 billion in debt. The Chapter 11 filing came as a bid for more time to restructure her business.

The company, which owns brands such as Picturehouse and Regal, said the court order would now allow it to meet current liabilities and pay staff wages.

Chapter 11 bankruptcies are different from other forms of declaring a business bankrupt. They mean the company will be able to keep all of its assets and trade as normal for the time being.

Cineworld has said it plans to emerge from bankruptcy in the first three months of next year.

Cinemas remain open worldwide for guests and members and operations continue without interruption.

Read more: FTSE: Cineworld sinks nearly 60% as blockbuster shortage bites

It comes as a number of DC films, including The Flash and Aquaman 2, have been pushed back to 2023 due to COVID production delays. Avatar: The Way of Water is also not set to premiere until December of this year after COVID-related issues delayed its release by more than a year.

Tom Cruise’s Top Gun: Maverick, however, was one of the few major releases in the first half of 2022. It earned £65.3m in the UK in June alone, and its global gross has surpassed £1bn to date .

The company is struggling under its huge debt, which has been exacerbated by the COVID-19 pandemic and the closure of cinemas around the world. It has also been hit by the success of streaming platforms, with new releases sometimes heading straight to the internet instead of the big screen.

Losses reached $3 billion in 2020 and $576 million in the first months of last year, sending its shares soaring. The stock is down more than 86% year-to-date.

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The group was also previously ordered to pay Canadian rival Cineplex more than £700m in compensation for abandoning a planned takeover. It was taken to court after it pulled out of a 2019 deal that would have seen it become North America’s biggest film operator.

The Canadian court’s decision dismissed Cineworld’s counterclaim, alleging violations of the merger agreement. The legal battle for damages is ongoing.

“Cineworld has been in a cash-strapped position for some time and these problems have been compounded by poorly targeted CAPEX spending. In many ways, the debt load they have been saddled with over the last few years began with Cineworld’s acquisition of Regal.” Lara Martinez, an analyst at Third Bridge, said.

“Our experts have raised questions about Cineworld’s US operating strategy, which has coincided with a decline in market share. Here, 2018 saw a chain-wide retro recliner program scrapped in favor of more extensive remodeling in a small number of cores It is doubtful that a reversal at this stage would help market share.”

He added: “Cineworld’s Chapter 11 filing presents an opportunity to reorganize Cineworld’s fortunes. Landlords who helped the cinema chain through COVID with flexibility in rental agreements will be watching the situation closely in case they lose out.”

Watch: Cineworld files for bankruptcy, AMC CEO praises private investors

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