Picturehouse owner Cineworld’s shares plunge on bankruptcy rumours
The Wall Street Journal has reported that the company is also considering filing for insolvency in the UK, where it owns the Picturehouse Cinema chain, after struggling to maintain its debt obligations.
It comes after a string of production delays due to covid pushed several major releases into next year, with the company issuing a profit warning on Wednesday.
The possible collapse of the firm comes despite its recent blockbuster success. Top Gun: Maverick made £65.3m ($78.65m) in the UK in June alone and worldwide has grossed more than £1bn to date.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “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.”
In the US Chapter 11 is considered to be a last resort for failing companies due to the bankruptcy rules in the States.
“It would ordinarily only be undertaken if the company had exhausted all other avenues,” Streeter said.
“It seems the discussions Cineworld had entered into earlier this week with stakeholders to obtain additional funding have not borne fruit.”
However, even if Cineworld does file for bankruptcy it’s unlikely to be the final chapter for the company.
Streeter said: “In the US this type of bankruptcy 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,” Streeter added.