Latest Twist In The Horror Story For Cineworld As Bankruptcy Rumors Swirl

Latest Twist In The Horror Story For Cineworld As Bankruptcy Rumors Swirl
652234 / Pixabay
  • Cineworld Group plc (LON:CINE) shares plunge 64% as the chain is rumoured to be ready to file for Chapter 11 bankruptcy in the US
  • It is also considering filing for insolvency in the UK according to the Wall Street Journal
  • Cineworld has struggled under its debt obligations amid a weak pipeline of blockbusters

Cineworld’s Bankruptcy Rumors

This is the latest twist in what’s been a Covid horror story for Cineworld after it failed to lure back enough movie goers to help pay back its enormous debts. The UK company which owns movie chains around the world was desperate for a slew of hits to help revive its fortunes but they have been few and far between.  Hopes had been raised that first spies, then superheros, then fighter pilots would prove to be the magic bullets for the company but there simply haven’t been enough blockbusters coming through to to break the spell of misfortune.

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Chapter 11 is considered to be a highly complex form of bankruptcy and would ordinarily only be undertaken if the company had exhausted all other avenues. It seems the discussions Cineworld had entered into earlier this week with stakeholders to obtain additional funding have not borne fruit but if it does file for bankruptcy, it’s unlikely to be the final chapter for the company. This type of bankruptcy known allows a company to stay in business and restructure its debt obligations but the plan has to be in the best interest of its creditors. There are many different insolvency proceedings in the UK but  a company may keep running if there is a chance that all or some of the business can be made workable or be sold on to a new owner. Even as a reorganised entity, Cineworld will face a tough challenge ahead as it’s unlikely that ticket sales will ever fully recover to the heady days of the past, given the huge shake-up of the movie industry and the growing might of the streaming giants.’’

Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown

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