Cineworld risks bankruptcy. Why it’s a ‘warning’ for other cinemas

The potential bankruptcy of the world' No. 2 theatre chain Cineworld is "a warning for the entire sector," according to one expert.

The potential bankruptcy of world No.2 cinema operator Cineworld is shining a spotlight on the wider industry as it struggles to recover from the pandemic and compete with the growing popularity of streaming.

Debt-laden Cineworld, which owns the Regal chain in the United States and runs theatres in nine other countries, said last week a lack of blockbusters was keeping movie-goers away and impacting its cash flows.

Last week, AMC Entertainment Holding Inc also flagged a tough third quarter due to a slim film slate. Its shares plunged 38 per cent in early U.S. trading on Monday.

Cineworld shares, which hit a record low on Friday after the Wall Street Journal first reported its potential bankruptcy, were down 26 per cent to the pence at 1340 GMT. That compares with a peak of more than 310 pence in 2017.

Cineworld, which had US$8.9 billion of net debt at the end of 2021 and had already said it was looking at ways to restructure its balance sheet, confirmed on Monday one option was a voluntary Chapter 11 bankruptcy filing in the United States.

“Cineworld would expect to maintain its operations in the ordinary course until and following any filing,” said the London-listed company, which operates more than 9,000 screens and employs around 28,000 people.

While Cineworld’s specific issue is its debt pile, the broader change in how audiences want to watch movies is a trend unlikely to reverse or get any easier for cinema chains, Hargreaves Lansdown analyst Sophie Lund-Yates said.

“Cineworld’s challenges are a warning for the entire sector,” she said.