We’ve covered Cineworld’s story quite a bit over the past few years, particularly looking at the pandemic, and subsequent purchase of Cineplex in Canada.
The cinema giant recently lost a case which is now appealing regarding the agreed sale, which happened just before the pandemic.
Cineworld pulled out of the deal afterwards, and the Ontario Superior Court Of Justice recently awarded Cineplex damages of £774 million.
And these are damages, Cineworld can nigh afford.
So whilst the lawyers return to the courtroom, shareholders in Cineworld face a tough wait.
Despite a hugely successful recent box office run for Top Gun: Maverick and The Minions: The Rise of Gru and strong weekends expected for Thor: Love and Thunder and the summer coming up, analysts don’t see Cineworld hitting their admissions targets this year.
With a recession on the way (if not already here) in many markets they operate in, the rising cost of living affecting UK households, we may also see dips in concessionary retail revenue.
Cineworld may struggle to repay their debts
The Times reports Cineworld is likely to breach debt covenants this year due to the above which puts them in a perilous position should the appeal be rejected as they do not have the cash to pay the damages of £774 million.
As we speculated in the past 12 months, the only way to do so would be to sell off some chains they currently have be it in the US, Europe or beyond, or at the very least high-performing sites that others will be willing to pay for.
Indeed, the actions of Mooky Gredinger haven’t been seen with praise from most shareholders lately.
From looking to pay high rewards to senior executives (including Mooky himself) to recently being convicted in court for term violations and receiving suspended jail time, this latest blow isn’t doing the family any favours.
Their worldwide competition, AMC Theatres (who own Odeon in the UK/Europe) continues to ride the popularity of the huge investment and share bounce they saw as a result of the social media explosion in stocks in 2020-2021.
Having reduced debt interest, made payments, restructuring and acquisitions in that time, they have certainly been saved from bankruptcy and on a better footing to see the next decade.
But will this be the case for Cineworld, at least in its current form by the end of 2022?
We’ll have to wait and see.
What do you make of the news?
Do you think the appeal will be rejected?
Let us know in the comments below; we’d love to hear from you!
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