The Cineworld Group plc (LON: CINE) share price fell 12.9% today amid a lack of updates from the cinema operator as many stakeholders await the end of the ongoing court-supervised bankruptcy process.Â
The last significant update from Cineworld was about the deal it reached with its junior creditors and landlords, allowing it to pay off $1 billion in debt owed to some lenders. At the same time, the company drew down a further $150 million from the debt funding package agreed upon with some existing lenders.
The company was allowed to borrow the $1 billion and use it to repay some of the debts it accumulated in 2020 and 2021 due to the coronavirus lockdown measures after settling with its landlords and junior creditors who initially opposed the plan.
After reaching an agreement with its junior lenders and landlords, Cineworld's path is more straightforward now, and the company is expected to exit the chapter 11 bankruptcy proceedings in Q1 2023. However, it is not clear what the company’s next steps will be.
Will the world’s second-largest movie theatre chain reach an agreement with the rest of its lenders regarding its massive debt burden allowing it to exit the bankruptcy process as a more robust company than it was at the beginning of the process? The short answer is this is the expected outcome.
Still, investors are waiting for an update from Cineworld regarding its next steps and what to expect. Meanwhile, Cineworld shares continue trading above a crucial long-term support level formed after it entered the bankruptcy process. I expect the shares to stay above this crucial level for a while.
Therefore, the chances of Cineworld shares rallying higher are greater than falling. However, I’m worried about the company’s appetite for debt and its massive debt pile. Hence, I will be staying away from its shares now.
*This is not investment advice.
Cineworld share price.
The Cineworld share price was down 12.85% to trade at 5.102p, falling from Tuesday’s closing price of 5.854p.