Britain's Cineworld Group (CINE.L) on Wednesday filed for bankruptcy protection in the United States as the world's second-largest cinema chain operator struggles to rein in its massive debt.
The Chapter 11 filing, which allows firms to stay in business while trying to restructure their debt, involves Cineworld's U.S., UK and Jersey operations, covering the bulk of its business.
Cineworld said it expected to emerge from Chapter 11 protection during the first quarter of 2023 and intended to pay all its vendors in full during the process as well as pay employees their usual wages.
Group companies have $1.94 billion of commitments from existing lenders and Cineworld expects to operate its global business and cinemas as usual throughout the process, it added.
Cineworld shares, which hit a record low of 1.80 pence after Wall Street Journal first reported its potential bankruptcy in August, settled 9.9% higher at 4.29 pence on Wednesday.
While Cineworld reiterated there was no guarantee of any recovery for holders of existing equity interests, it does not expect the filing to result in a suspension of trading in its London shares.
Cineworld also said it expected to change its real estate strategy in the United States and would engage with landlords to improve U.S. cinema lease terms.
While the cinema industry has been struggling to recover from the pandemic, Cineworld's specific issue is the amount of debt it has amassed over the years.
Its net debt including lease liabilities stood at $8.9 billion at the end of 2021. Excluding lease liabilities, its net debt was $4.84 billion at that time. The company's market value was about 59 million pounds ($68 million) at Wednesday's close.
Cineworld, which operates more than 9,000 screens across 10 countries and employs around 28,000 people, took on debt to fund part of its $3.6 billion purchase of Regal in 2017, and more to survive the pandemic.
Two years ago, it abandoned plans to take over rival Cineplex (CGX.TO) and is in a legal dispute with the Canadian firm, which has sought C$1.23 billion ($946 million) in damages.
($1 = 0.8720 pounds)