If Cineworld LSE:CINE still has a set of tannoys in its Brentford-headquarters, the lyrics to Sinatra’s My Way might well be playing through the company’s offices.
For sure the end is here and Cineworld – as we know it – is facing the final curtain, following the company’s announcement that it was filing for administration in the UK and in the coming few weeks will emerge from Chapter 11 bankruptcy protection in the US.
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The deal, as previously reported, involves the release of about USD4.53bn of the group’s debt, a rights offering to raise gross proceeds of USD800m and the provision of USD1.46bn in new debt financing. The restructuring plan, which Cineworld managed to agree with the majority of its creditors last month, would wipe-out the company existing shareholders, who would receive nothing, or next-to-nothing from the restructuring agreement.
Rise and fall
The company has definitely travelled each and every highway, building a business that started off in 1995 in disused bingo hall in Stevenage, it grew to become the second largest cinema chain in the world, at its height worth GBP12.8bn pre-Coronavirus pandemic.
The acquisition of Cinema City International in 2014 from the Greidinger family, propelled Cineworld into Eastern Europe and Israel, and the scion of patriarch, Moshe Greidinger, who established Cinema City in Haifa in 1929, Mooky Greidinger, became the chain’s CEO and oversaw the company’s next, aggressive expansion campaign that made it one of the world’s biggest entertainment companies.
But this expansion was built on the back of cheap credit (something that in 2023 is a memory almost as vague as black and white valve TVs) and big, ambitious deals. And when Coronavirus emerged as a thing, a business interruption that no one could have seen coming, Greidinger and Cineworld found out that they had bitten off much more than they could chew and were forced into trying to service near USD5bn of debt – accumulated from a series of deals that went sour, or assets overpaid for – with no income, as cinemas across the country were forced to close their theatres to the public.
Chapter 11
What soon followed was a collapse into Chapter 11 Bankruptcy Protection in the States and an attempt to raise some cash to pay its debtors and landlords by selling off the non-core parts of the business, a process that the company gave up on in April whilst seeking a buyer for the core business centred on the UK, US and Ireland.
However, Greidinger’s insistence that the core business be sold as a whole entity and not broken up and distributed like a family-sized Dairy Milk chocolate bar meant that despite the wooing of competitors, including Vue, a subsidiary of AMC Theatres NYSE:AMC and Canada’s Cineplex [TSE:CGX] a buyer could not be found, and the company withdrew the core business from sale.
During the process, the share price melted away like a child’s ice lolly dropped on the pavement on a hot day, falling from a high of nearly GBP3 a share in April 2019 to 0.3p. The company opened trading today (7th July) at 0.41p and has offered a year-to-date return of -89.96%, a one-year return of -98.07% with shares ranging between 0.3p and 24.45p over a 52-week period. The company is valued at GBP4.8m.
Golden handshake
That said, Mooky Greidinger, arguably the architect of Cineworld’s downfall must have the words: “Regrets, I’ve had a few; But then again too few to mention; I did what I had to do; I saw it through without exemption” playing through his iPod as he shuttles from boardroom to boardroom tying up the final details of the reported USD35m golden handshake that it will take him and his management team to leave the Cineworld building. No doubt, ignoring the line: “there were times I’m sure you knew; When I bit off more than I could chew…” he will reemerge before long at the helm of another global entertainment business.
For the next few weeks, the existing management of Cineworld will be interviewing potential insolvency practitioners to help the firm navigate through the administration process before all of Cineworld Plc’s assets are transferred into the holdco, Crown U.K. Holdco Ltd, a wholly-owned subsidiary which will be controlled by the group’s lenders, as outlined in the restructuring plan. Then Cineworld will wave a goodbye to the stock exchange after 16-years as a listed entity.
Unfortunately, at that point, in the words of the song, shareholders will have to eat it up and spit it out. The Cineworld tale has been long in the making. However, the way that the business has planned its charted course through debt, disruption and rebirth will have been closely watched by other big beasts grappling with their own debt icebergs, not least Vodafone LON:VOD.
Cineworld is expected to release its latest results imminently.
