The second largest movie theater chain in the world has filed for Chapter 11 Bankruptcy.
The United Kingdom-based Cineworld Group submitted bankruptcy paperwork to the United States Bankruptcy Court for the Southern District of Texas. The company operates a total of 747 locations in 10 countries, including Knoxville-based Regal Cinemas.
“We have an incredible team across Cineworld laser focused on evolving our business to thrive during the comeback of the cinema industry,” said Cineworld Chief Executive Officer Mooky Greidinger in a statement on Sept 7. “The pandemic was an incredibly difficult time for our business, with the enforced closure of cinemas and huge disruption to film schedules that has led us to this point. This latest process is part of our ongoing efforts to strengthen our financial position and is in pursuit of a de-leveraging that will create a more resilient capital structure and effective business.”
The COVID-19 pandemic had an irrevocable impact on the movie industry. From delayed release dates, social distancing restrictions, and the rise in streaming services, the number of people going to the movies collapsed. According to data reported by Comscore, American movie theater box offices recorded an 80% drop in ticket sales. This was the lowest domestic tally in roughly 40 years. For comparison, box offices recorded just over $11 billion in ticket sales in 2019 and a little more than $2 billion in 2020.
Although COVID-19 cases and restrictions declined in 2021, economic analyst and writer Wolf Richter reported that just 499 million tickets were sold at the box office – down 59% from 2019. Movie ticket sales were also 68% below the rates recorded in 2002, the year movie ticket sales peaked.
According to Deadline, “Cineworld took on significant debt acquiring Regal in 2018 for $3.6 billion. While the chain made some progress paying it down, it didn’t enter Covid on great financial footing. It carries debt of about $5 billion. Separately, [a] Canadian judge ruled late last year the company is liable for more than $1 billion in damages for [backing] out of a deal to buy Cineplex.”
Greidinger said declaring bankruptcy would allow Cineworld to “execute our strategy to reimagine the most immersive cinema experiences for our guests” including introducing the “most cutting-edge screen formats” and other “enhancements to our flagship theatres.”
“Our goal remains to further accelerate our strategy so we can grow our position as the ‘Best Place to Watch a Movie,’” he said.
Cineworld secured $1.94 billion in bankruptcy loans and intends to include a “real estate optimization strategy” as part of its restructuring plan. The company aims to pursue a “de-leveraging that will create a more resilient capital structure and effective business.”
Cineworld said the business operation should continue as usual during the restructuring and that it is expected to be out of Chapter 11 by the first quarter of 2023.