Cinema chain Cineworld Group Plc plans to have its venues open by May 2021 and says it has secured the future of the business after obtaining additional cash and slashing costs.
The company, which closed its UK outlets in early October, said it has “secured significant additional liquidity whilst implementing further operational measures to deliver enhanced profitability over the long term”.
This includes a new debt facility of US$450million, an issue of equity warrants, bank covenant waivers until June 2022, extended maturity of a US$111million incremental revolving credit facility from December 2020 to May 2024, and the bringing forward of an expected tax refund of more than US$200million to early 2021.
Cineworld said it believes that together these steps will provide the company with financial and operational flexibility until lockdown restrictions in key jurisdictions, such as the UK and USA, are eased and studios are able to bring their enhanced pipeline of major movie releases back to the big screen.
The company, which operates 128 cinemas in the UK including a recently-opened IMAX-led multiplex in Plymouth’s £53million city centre Barcode development, said it has taken action to mitigate the impact of these closures whilst “prioritising the welfare of our employees, customers and other stakeholders”.
Cineworld has agreed long-term rent deferrals with key landlords, in conjunction with new lease agreements in some circumstances, and discussions are continuing in relation to other potential abatements and deferrals. In addition, all its new capital expenditure programmes are now on hold.
These actions, together with a number of other initiatives, have meant Cineworld has successfully reduced its monthly cash expenditures to about US$60million whilst cinemas are closed.
Given the uncertainty of the duration of the Covid pandemic, the company has worked with its financial advisors to plan for multiple scenarios.
Its main best case scenario assumes a reopening of cinemas no later than May 2021. Under this scenario, Cinewotrld has sufficient headroom for 2021 and beyond.
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In the event of a further delay to the cinema reopening, however, the firm expects to retain sufficient liquidity for a number of additional months, but may require lender support in order to deploy that liquidity.
But despite the success of these cost saving actions and the other measures, the company will continue to consider all options to ensure its business remains viable in light of the uncertainties regarding the duration of the Covid pandemic and its potential impact on medium-term operating restrictions and the content pipeline.
These options will include determining how the proceeds of the new financing arrangements should best be utilised by the US and UK businesses and the relevant subsidiaries within the firm, and continuing discussions with landlords across the company’s estate and other key stakeholders to manage costs.
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Mooky Greidinger, chief executive of Cineworld, said: "The measures we are announcing today deliver over US$750million of extra liquidity to support our business.
“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."
Alicja Kornasiewicz, chair of Cineworld, said: " In light of the severe financial challenges facing the group arising from the significant disruption to the entire industry, the board is confident this additional liquidity will preserve and maximise shareholder value over the long term."
