Shares in Cineworld plunged 20 per cent this morning after the beleaguered entertainment chain was forced to drop the sale process in its US, UK and Ireland businesses after it failed to find a buyer.
The cinema operator, which was hit hard by the fall out from Covid-19, revealed it will be taken over by its creditors in a bid to restructure its debts and keep the struggling company afloat.
The deal includes providing $1.46bn (£1.19m) in new debt financing and a new share offering of $800m (£649m) – which will give its creditors a 100 per cent stake in the company.
Cineworld said the move will help cut its debts by $4.53bn (£3.68bn).
“This agreement with our lenders represents a ‘vote-of-confidence’ in our business and significantly advances Cineworld towards achieving its long-term strategy in a changing entertainment environment,” Mooky Greidinger, chief executive of Cineworld, said.
Cineworld, which has 127 branches in the UK and also owns the Picturehouse chain, has been struggling since the pandemic to draw customers back to screens
“We’ve seen Cineworld shares drop sharply yet again this morning, with prices falling more than 20 per cent on the news that the group has ended proposed sales of its valuable US, UK and European businesses and announced a debt restructuring,” Joshua Raymond, Director at online investment platform XTB.com said.
“After it became pretty clear that a deal for the whole group was unlikely, the cinema group had only a few options left. It seems that they’ve now chosen to give its creditors the ability to exchange debt for equity and will now most likely look to raise cash by selling assets outside of its core US, UK and European markets.”