Cineworld, the world's second biggest cinema chain, announced that it has filed for bankruptcy protection in the United States as it seeks to restructure after facing low audience numbers.
The group, which operates hundreds of US cinemas, said in a statement that it filed for Chapter 11 at a bankruptcy court in Texas.
Chapter 11 of the US bankruptcy code is a court-supervised restructuring process that provides companies time to negotiate with creditors to reach a settlement on the reduction of debts.
Cineworld said it "will seek to implement a de-leveraging transaction that will significantly reduce the Group's debt, strengthen its balance sheet and provide the financial strength and flexibility to accelerate, and capitalise on, Cineworld's strategy in the cinema industry".
The statement said it hoped to emerge from bankruptcy proceedings in the first quarter of next year, and had $1.94bn in financing from existing lenders to help it through that period.
The company also warned existing shareholders that their holdings would likely be considerably diluted as part of the bankruptcy process.
Eric Snyder, a bankruptcy expert at Wilk Auslander, said Cineworld's creditors were not giving the company "a lot of time to make the decision between reorganising or selling it".
A big problem for the company is that "travelling to a movie theatre to watch a movie for two to three hours, and spending $20 to $25, is just not attractive anymore for a lot of people, especially young people," Mr Snyder added.
Cineworld shares had been going down since the beginning of the year, as the company's position deteriorated when people did not return to cinemas after Covid-19 lockdowns were eased.
Shares plummeted last month when the company acknowledged it was considering filing for bankruptcy.
Cineworld shares rose 10% yesterday to 4.94 cent, but were still down 87% from the start of the year.
Analysts argue that Cineworld's 2018 takeover of American peer Regal left it saddled with too much debt, putting it in a poor position to weather the pandemic.
