The Cineworld Group plc (LON: CINE) share price plunged 39.4% after revealing that it had reached a restructuring support agreement (RSA) and a backstop commitment agreement (BCA) with lenders holding and controlling about 83% of its term loans due 2025 and 2026 and revolving credit facility due 2023.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.
The legacy lenders have agreed to Cineworld’s restructuring plan allowing the movie theatre operator to convert about $4.53 billion in debt into equity. Given the significant debt set to be converted into equity, the company’s existing shareholders will be wiped out, which explains today’s decline in Cineworld shares.
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The restructuring plan is the best outcome for Cineworld since it allows the company to keep all its operations intact and benefit from economies of scale. The lenders also agreed to provide a first lien exit financing facility and to backstop an equity rights offering as part of the proposed restructuring.
Cineworld will raise $800 million in gross proceeds via a fully backstopped equity offering (Rights Offering)to the legacy lenders as part of the restructuring plan. The capital raise will also include a direct equity offering to specific Legacy Lenders.
The restructuring plan will also provide $1.46 billion in new debt financing (Exit Facility) to the Group Chapter 11 Companies once they emerge from the Chapter 11 Cases. The Exit Facility and Rights Issue proceeds will be used to repay the $1.94 billion debtor-in-possession financing facility entered into at the start of the Chapter 11 case.Â
The proceeds will also fund the costs associated with Cineworld's exit from the Chapter 11 cases and the company's future business operations.
Mooky Greidinger, Cineworld’s CEO, said: “This agreement with our lenders represents a ‘vote-of-confidence' in our business and significantly advances Cineworld towards achieving its long-term strategy in a changing entertainment environment. With a growing slate of blockbusters and audiences returning to cinemas in increasing numbers, Cineworld is poised to continue offering moviegoers the most immersive cinema experiences and maintain its position as the ‘Best Place to Watch a Movie'.”
Cineworld is now at the end of its Chapter 11 bankruptcy proceedings.
*This is not investment advice.
Cineworld share price.
The Cineworld share price plunged 39.37% to trade at 1.74p, from Friday’s closing price of 2.87p.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.