By Scott Kanowsky
Investing.com -- Shares in Cineworld Group (LON:CINE) plummeted to a fresh record low on Tuesday after the ailing movie theater chain announced that it has filed a plan of reorganization with a U.S. bankruptcy court in Texas that will all but wipe out existing shareholders.
In a statement, the company said that the move has the support of lenders holding about 83% of its loans due in 2025 and 2026, as well as a revolving credit facility due in 2023. It added that the plan, which still needs to be approved by the Texas court, will not provide "any recovery for holders of Cineowrld's existing equity interests."
Cineworld, the world's second-largest operator of cinemas, first announced earlier this month it is set to emerge from Chapter 11 bankruptcy proceedings in the U.S. following an agreement on a massive debt reduction and capital injection with its creditors.
The deal will see the creditors swap $4.53 billion in debt for equity, and place another $800 million into the group through a rights issue at a 25% discount to the implicit equity value of the new company.
In addition, they will give Cineworld a fresh $1.46B in new debt financing as it comes out of Chapter 11 bankruptcy.
Cineworld had collapsed under the weight of its debts when the pandemic forced governments around the world to close cinemas to stop transmission of COVID-19.
The closure critically denied the owner of the Regal movie theaters the revenue it needed to service a growing debt burden after it borrowed heavily to acquire Canadian-based Cineplex. Its subsequent efforts to pull out of that deal were struck down by Canadian courts, leaving Cineworld with no way to escape its debts.
The recapitalization will fully repay the $1.94B debtor-in-possession financing agreed upon at the start of the Chapter 11 proceedings.
The group is still in talks to sell its movie theaters outside the U.S., U.K., and Ireland.