Regal Owner Cineworld Was Just Given A Huge Lifeline In Its Bankruptcy Battle
Cineworld, one of the largest movie theater operators in the world, recently began its Chapter 11 bankruptcy proceedings. It had been expected that the owner of Regal Cinemas, the second-largest theater chain in the U.S. (behind only AMC), was going to have to go down that road, and now we're here. Fortunately for those who enjoy Regal and Cineworld's other chains around the world, they aren't closing their doors. In fact, the company has just been handed a pretty healthy lifeline from its bankruptcy court.
Per a press release, United States Bankruptcy Court for the Southern District of Texas has granted the company immediate access to up to approximately $785 million of an approximate $1.94 billion debtor-in-possession ("DIP") financing. This is part of what's known as "first-day" relief. So what does that mean, exactly? DIP financing is a special kind of financing that is generally only made available to companies that have filed Chapter 11. Essentially, this money is used to help reorganize the business and keep operations moving while the bankruptcy case unfolds. So, in essence, they will have access to money to keep the doors open.
The only negative here is that it will add even more debt to Cineworld's already very heavy debt load, which is said to be in the $9 billion range. But it will save them from having to close up shop. Unfortunately for those Cineworld does owe money to, this DIP financing generally takes precedent in cases such as this and will likely be paid back first. That means the company's other creditors might have an even longer wait for the money they are owed. But much has yet to be determined as this bankruptcy case is, in many ways, in its infancy.
A long road ahead
In the press release, the company stated that they "intend to pay vendors and suppliers in full and on normal terms for valid amounts for goods and services received during the Chapter 11 process." They also added that "Employees will also continue to receive their usual wages and benefits without interruption." So, despite the Chapter 11 of it all, moviegoers and employees will hopefully feel like it's business as usual, more or less. Mooky Greidinger, Chief Executive Officer of Cineworld, had this to say in a statement:
"Today's approval of our requested 'first day' relief is a positive step forward for the Group and our restructuring efforts. As we position Cineworld for long-term growth, through this Chapter 11 process and beyond, we remain steadfast in our commitment to providing our guests with the most memorable moviegoing experiences and maintaining our long-standing relationships with our business partners."
This comes at a time when the industry is still very much trying to dig itself out of the pandemic-sized hole that 2020 created. Studios need theaters right now to make movies like "Top Gun: Maverick" into big hits, but these theater chains also need a steady stream of movies that can put meat in seats. Right now, things look a little rough in that department until October. But at least Cineworld can keep Regal and its other theaters open because if those doors suddenly closed, it could be catastrophic to the movie business at large.