24th Feb 2023 13:30
(Alliance News) - Cineworld Group PLC's days as a listed company may be numbered, after it received various expressions interest for its parts of its estate, but saw suitors fall short of making a full cash offer.
"We could see a break-up" of the Brentford, London-based cinema chain, said AJ Bell analyst Russ Mould, even though Cineworld has previously said it had no plans to sell individual assets.
Cineworld shares continued plunging on Friday, falling 34% to 2.63 pence by early afternoon. In the past 12 months, its stock has fallen a debilitating 93%.
On Friday said, the beleaguered cinema chain said it has received non-binding proposals from a number of counterparties for some or all of its businesses, but the debt-ridden business expects any deal with its creditors will wipe out its shareholders.
"None of these proposals involves an all-cash bid for the entire business," Cineworld confirmed.
Mould said Cineworld had "paid the price" for being too aggressive in its growth ambitions. It is now "weighed down by significant debt when the pandemic struck and the subsequent reopening of the cinema industry being too weak to repair its finances".
"It has watched too many gambling films and played the wrong hand," Mould continued. "Selling subsidiaries doesn't mean it will be suddenly swimming in cash. Any interested party in Cineworld's assets knows that the cinema group is desperate and so they are likely to pitch any offers at a low level."
It is thought that any rescue deal for the business will mean handing over control to the companies and people that Cineworld owes money to. And shareholders are unlikely to get anything back.
The world's second-largest cinema chain now expects to emerge from Chapter 11 proceedings in the first half of the year. Business operations continue as usual, the firm said.
"From where we stand today, two things look almost certain – one, that we won't see a bidder for the whole business; and two, that shareholders will be left with nothing," Mould added.
"Even if the company does sell some of its subsidiaries, the end game still appears to be a debt-for-equity swap whereby creditors take control of the business."
On Wednesday, the Financial Times reported Cineworld was yet to receive any full takeover offers, as its bankruptcy hearings continued in the US.
A lawyer representing Cineworld told a Texas court that it has contacted a "broad universe" of about 40 possible suitors, the FT reported.
Back in September 2022, Cineworld confirmed it was beginning a Chapter 11 filing in US Bankruptcy Court in Texas, as it grappled with liquidity woes.
It had first announced it was considering a Chapter 11 filing on August 22, and any deleveraging would likely result in a "very significant dilution" of its shares.
Since then, there have been reports that Cineworld has been in discussions with London-based Vue International and Toronto-based Cineplex, which prompted to briefly rally 18% as news broke Vue was potentially preparing a rescue bid earlier in February.
Before the Covid-19 pandemic, Cineworld had agreed to buy Cineplex, but later backed out and was ordered to pay damages to Cineplex by a Canadian court.
By Greg Rosenvinge, Alliance News reporter
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