The Cineworld Group plc (LON: CINE) share price rose 3.53% after the company stated that it intends to emerge from the ongoing court-supervised chapter 11 bankruptcy proceedings largely unscathed.
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The latest update issued by a Cineworld spokesperson, according to a report by Sharetalk UK, was meant to reassure investors after reports emerged that the company’s senior creditors were looking to sell its Eastern European assets.
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Cineworld currently operates the Yes Planet, Cinema City and Rav-Chen brands in Eastern Europe. Recent reports suggested that the company’s creditors were looking to sell these assets to an Israeli firm to recoup some of their debts.
However, Cineworld has denied the reports saying that it will emerge from the bankruptcy process intact. Those familiar with my previous coverage of Cineworld know that the Greidinger brothers, who run the company, do not want to lose their cinema empire.
In the past, the brothers rejected an offer from Canadian rival Cineplex to buy their Regal Cinemas chain in the United States, which would unlock significant value for their creditors, especially if it was a cash deal.
Cineworld acquired Regal Cinemas for US$3.6 billion in December 2017, taking on significant debt to fund the acquisition. I believe that the senior secured creditors are pushing for asset sales to recoup some of their investments.
I don’t think Mooky and Israel Greidinger will succeed in keeping Cineworld intact through bankruptcy. The company had $8.9 billion in debt at the end of 2021, falling to $4.8 billion when lease liabilities were excluded.
However, time will tell as the bankruptcy proceedings are still ongoing. The company expects to emerge from the bankruptcy process in Q1 2023, at which time we will know what the creditors have decided since its fate lies in its creditors' hands.
The only way Cineworld might retain all its assets is if there is no cahs buyer. I believe the creditors are pretty interested in getting their cash back and may reject a deal that is part-funded by shares.
As an investor, I would avoid Cineworld shares due to the company’s massive debt and the risk of liquidation that still looms over it despite the ongoing bankruptcy proceedings.
*This is not investment advice.
Cineworld share price.
The Cineworld share price edged 3.53% to trade at 4.97p, rising from Friday’s closing price of 4.80p.
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