Cineworld (LON: CINE) share price is up by 4 percent in today’s trading session. However, despite the price surge, Cineworld’s main problem involves its bankruptcy filing, which is likely to define its performance in 2023.
Cineworld Bankruptcy
Cineworld, the second-largest movie theater operator in the world, is currently in the midst of a bankruptcy process in the United States. The London-listed company filed for Chapter 11 protection in September and has been seeking potential buyers for all of its assets since. However, the process has been met with difficulties, as Judge Marvin Isgur of the Southern District of Texas criticized the company for its lack of progress in court this week.
The company, which operates Regal Cinemas in the US, has closed 23 locations and is in negotiations with 25% of its landlords to reduce costs at other theaters. Judge Isgur called on Cineworld to be more aggressive in their efforts and said, “We are not going to stick around forever. The debtors need to be aggressive. I am not sitting here for a year or for six months to figure out what shops are closing. That is a process that is going to happen now.”
Cineworld has been significantly impacted by the Covid-19 pandemic, which has caused widespread closures in the movie theater industry. Despite the recent release of blockbusters like the Avatar sequel and Black Panther: Wakanda Forever, Cineworld has warned that shareholders still face the risk of having all their financial interests wiped out.
The company’s debt burden, which stood at $5.2 billion at the end of June, has also been a major factor in its financial struggles. The company burned through $145 million of cash in the first half of last year.
Cineworld’s problems have also been compounded by its failed takeover of Canadian rival Cineplex, which led to an ensuing legal battle. The company’s CEO, Mooky Greidinger, said that a formal sales process for all of its assets would be launched this month in an attempt to avoid being picked apart piecemeal.
AMC, Cineworld’s larger US-based rival, announced last month that it had held talks with some lenders to Cineworld about buying some of its cinemas in the US and Europe. However, Cineworld has since stated that neither the company nor its advisers were party to those discussions. In a filing with the Securities and Exchange Commission on Wednesday, AMC said that the discussions with Cineworld lenders regarding assets in the U.S. and Europe had ended.
The cinema industry has been hit hard by the pandemic, with Cineworld becoming a prime example of the financial woes faced by theater operators. As Judge Isgur noted, the industry is in a state of flux, and people need to figure out what the future of the industry looks like.
Cineworld Price Forecast
Much of what will happen with the company’s share price will depend on its bankruptcy filing and how it approaches the issue. Therefore, it is still too early to forecast how the company’s financial struggle will play out in the long term.
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