Cineworld shares sank on Monday as equity holder value destruction ratcheted up with developments in their restructuring plans.
New equity will be issued to lenders as part of a restructuring deal. Cineworld also announced a rights issue to raise additional capital. The rights issue will be offered to existing lenders and seeks to raise $800m.
Cineworld said their restructuring plans do “not provide for any recovery for holders of Cineworld’s existing equity interests.”
Cineworld shares were down over 22% at the time of writing.
“Cineworld’s shareholders had been given plenty of warning their investment in the business could be wiped out by a debt restructuring and this looks like it will soon happen. The company’s lenders are going to gain control through a debt for equity swap and a rights issue, giving Cineworld yet another throw of the dice to try and sort out its finances,” said Danni Hewson, head of financial analysis at AJ Bell.
“Keeping the US and UK operations and only potentially selling its Eastern European and Israeli sites will streamline the group and put it in a better position to ride the recovery in the cinema industry – if it comes.”
Hewson continued to explain the deep issues facing cinemas with the rise of streaming platforms.
“That’s a big ‘if’ as competition from streaming platforms has become intense and film-lovers are increasingly happy to watch new releases at home. It helps that gigantic flatscreen TVs are much more affordable these days, as are speakers, so it is easy to create a good cinema experience in the home.”