Cineworld shares rocket on securing debt lifeline

Shares at the world’s second-largest cinema chain, Cineworld (LON:CINE), have rocketed more than 22% on the back of the news that the firm has secured waivers for its debt deadlines until June 2022 and £336 million in new loans to help see it through the remainder of the pandemic.

Last week, Cineworld shares took a tumble amid rumours that the chain was seeking a CVA to take the pressure off its mounting debt crisis – with more than £6 billion owed to creditors and a half-year loss of £1.3 billion due to a fatal combination of global lockdown measures and a near-paralysis of new blockbuster releases.

The chain temporarily closed all of its UK and US sites back in October, but has said that today’s move will provide Cineworld with “financial and operational flexibility until lockdown restrictions in key jurisdictions are eased and studios are able to bring their enhanced pipeline of major releases back to the big screen”.

Among the new terms are equity warrants worth around 11% of its share capital, debt measures set to give the company over £233 million of extra liquidity, and reduced monthly cash spend to around £45 million.

Cineworld also extended its £83 million incremental revolving credit facility from December 2020 to May 2024, as well as pulling forward an expected tax refund of more than £150 million to early 2021.

Mooky Greidinger, chief executive at Cineworld, welcomed the chain’s news:

“Over the long term, the operational improvements we have put in place since the start of the pandemic will further enhance Cineworld’s profitability and resilience.

“The group continues to monitor developments in the relevant markets in which we operate and our entire team is focused on managing our cost base.

“We look forward to resuming our operations and welcoming movie fans around the world back to the big screen for an exciting and full slate of films in 2021″.

News of Cineworld’s debt waiver sent shares at the company soaring 22.37% at lunchtime on Monday 23/11/20, up to 56.40p, following on from an extremely turbulent year which saw prices crash to an annual low of 15.64p in March.

Recent weeks have seen its share price edge higher, up 42.45% in the last month, as combined vaccine development efforts fuel the cinema industry with hope that a post-pandemic world may be on the horizon.

Analysts at Investec (LON:INVP) commented on Cineworld’s news, stating:

“With vaccine development progressing, this should give investors significantly greater confidence in Cineworld emerging from the crisis, allowing the company to capture demand as it returns with a robust slate of postponed films.

“Although recent changes to the theatrical window by peers have captured industry headlines, we continue to believe those will have limited impact on industry box office revenues overall”.

 

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Bronte Carvalho
Junior Journalist at the UK Investor Magazine. Focuses primarily on finance and business content. Has personal interests in Middle Eastern politics, human rights issues, and sustainability initiatives.