The Cineworld Group plc (LON: CINE) share price fell 18.4% after AMC Entertainment pulled out of talks to acquire some of the company’s assets in a deal funded by the issuance of APEs and debt financing from a group of lenders.
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This is the latest development in Cineworld’s chapter 11 bankruptcy proceedings as another potential suitor drops off, increasing the chances of the movie theatre operator emerging out of the process intact as envisioned by Mooky Greidinger, the CEO.
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In a filing with the US Securities and Exchange Commission (SEC), AMC Entertainment said that it had participated in discussions with specific Cineworld lenders about a strategic acquisition of Cineworld assets in the United States and Europe via a consensual plan.
The discussions came about as Cineworld’s debtors explored strategic alternatives, including selling certain theatre assets. The acquisition would have been partially funded via the issuance of AMC’s APEs and debt financing provided by the lenders.
The funding was on condition that AMC complete a specific liability management exercise regarding its current indebtedness. However, the firm did not reach a definitive agreement with its lenders that could be presented to Cineworld’s creditors. Hence, it discontinued the negotiations.
AMC warned investors that while it still had the right to acquire strategic assets, there were no guarantees that it would reignite discussions with the lenders. Moreover, even if such discussions resumed, there were no guarantees that a mutually beneficial agreement could be reached.
Circling back to Cineworld, it is clear that finding a buyer for the company’s assets is not an easy task and may be impossible, given the company’s massive dent pile.
If the situation does not change, Cineworld’s creditors may have no choice but to restructure their debts and let the Greidnger brothers attempt to revive the world’s second-largest movie theatre operator.
However, only time will tell whether any other well-capitalised buyers will emerge and present an all-cash deal for Cineworld, which is likely to be accepted by creditors looking to cut their losses.
*This is not investment advice.
Cineworld share price.
The Cineworld share price was trading down 18.41% at 3.53p, falling from Tuesday’s closing price of 4.18p.
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