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Cineworld Shares Are Range-Bound As Bankruptcy Case Continues

Simon Mugo trader
Updated 25 Nov 2022

The Cineworld Group plc (LON: CINE) share price has been trading sideways for most of November as investors await the outcome of the company’s ongoing Chapter 11 bankruptcy proceedings.

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To get you up to date with what has been going on with the bankruptcy case, Cineworld filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas (Houston Division) on September 7, 2022.

The first-day hearing was held on September 8, 2022, with the judge approving most of Cineworld’s first-day motions, including granting it access to $785 million s part of a debtor-in-possession loan while withholding approval of some requests. 

At the time of filing for bankruptcy, Cineworld had $4 million of cash in its bank account, which was not enough to cover its weekly payroll obligations; hence, the company was in dire need of securing some extra cash to prevent it from being declared illiquid. 

Since then, the movie theatre operator held a meeting with its lenders on September 19, 2022, with the first omnibus hearing being held on October 31, 2022, and was continued on November 17, 2022. As a result, the cinema chain reached an agreement with its landlords and junior unsecured lenders on October 31, 2022, leading to a spike higher in its share price. 

However, since then, nothing much has happened regarding the case. The company is expected to hold two more omnibus hearings on December 9, 2022, and December 12, 2022, after which the January 17, 2023, deadline for filing claims will be in play. 

Overall, nothing much is happening with the hearing that is not in the public domain. However, the last significant development was the agreement between Cineworld, its landlords, and junior creditors, which had far-reaching consequences. 

For example, the company agreed to consider selling its business to unlock much-need cash to pay off some of its creditors. The company had $8.8 billion in net debt, which it simply can’t repay without disposing of some of its assets. 

Cineworld also agreed to give its creditors a say in the outcome of the bankruptcy proceedings, including a say on which businesses could be sold and at what price. However, as an investor, I wouldn’t buy Cineworld shares due to its multiple challenges, one being its massive debt pile. 

*This is not investment advice. 

Cineworld share price.

The Cineworld share price has been trading sideways since early November amid bankruptcy proceedings.

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading