Regal Owner Cineworld Reveals Low Admissions, Warns of ‘Very Significant Dilution’ of Equity Interests

Exhibition giant Cineworld has revealed lower than expected cinema admissions, which could potentially lead to equity dilution, going forward.

In an update on Wednesday on its current trading, liquidity position, capital structure and the ongoing impact of the COVID-19 pandemic on the group, Cineworld said: “Despite a gradual recovery of demand since re-opening in April 2021, recent admission levels have been below expectations. These lower levels of admissions are due to a limited film slate that is anticipated to continue until November 2022 and are expected to negatively impact trading and the group’s liquidity position in the near term.”

Admissions for the group climbed from 54.4 million in 2020 to 95.3 million in 2021.

The company, which owns Regal Cinemas in the U.S., recorded a $708.3 million loss before tax for the full year ending Dec. 31, 2021, a vast improvement from the $3 billion loss in 2020. However, the group’s net debt, excluding lease liabilities, increased by $492.7 million from $4.33 billion to $4.84 billion.

Cineworld said it was “taking proactive steps to ensure it has the balance sheet strength and flexibility to adapt to market conditions. This includes significant previously disclosed operational and financial initiatives to manage costs and enhance liquidity. The group believes these steps are required to optimize its ability to maximize enterprise value as part of the recovery in the cinema industry.”

“In connection with these initiatives, the group remains in active discussions with various stakeholders and is evaluating various strategic options to both obtain additional liquidity and potentially restructure its balance sheet through a comprehensive deleveraging transaction,” Cineworld said.

“Any deleveraging transaction will likely result in very significant dilution of existing equity interests in Cineworld,” the group warned.

In the meantime, it is business as usual for the group. “The group’s business operations are expected to remain unaffected by these efforts and Cineworld expects to continue to meet its ongoing business counterparty obligations,” Cineworld said. “Cineworld continues to welcome guests to its cinemas across its global markets as normal, without disruption.”

Cineworld operates in 10 countries including the U.S. and the U.K. with 751 sites and 9,189 screens globally.

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