Shares in global cinema chain Cineworld (CINE) plunged 14% to 66.58p on Tuesday as worries emerged over the future of two of its peers.
Speculation gathered pace that the planned takeover of Cineplex, the Toronto-listed cinemas chain, might be blocked by its lenders. Adding to the industry uncertainty were reports that US cinema firm AMC has entered Chapter 11 bankruptcy talks.
The company closed its entire estate of 787 cinemas across 10 countries on 7 April while saying it was discussing ‘ongoing liquidity’ requirements with its lenders.
The shares came under pressure following the full-year results announcement on 12 March when the company articulated its downside scenario, saying it risked breaching financial covenants, unless a waiver agreement was reached with the required majority of lenders.
The $2.3bn acquisition of Cineplex was financed using a $2bn extension to the firm's existing debt and a $300m unsecured bridge loan, raising net debts to $5.6bn. The company was banking on receiving combination benefits of $133m under the deal, which would reduce its debt burden.
The legal position is unclear especially given that shareholders approved the deal in February.
BANKRUPTCY DOOM HITS AMC
More gloom was heaped on the situation after reports that US cinema group AMC Entertainment looked likely to file for bankruptcy after closing 630 theatres and furloughing 25,000 employees.
After telling landlords it wouldn't be paying rent from 1 April, the firms’ creditors began preparing for bankruptcy by retaining their own specialist restructuring lawyers.