Cineworld’s story has shareholders watching through their hands

theguardian.com:

One can’t call it a major twist in the plot in the disaster movie for investors that is Cineworld, owner of 750 cinemas in 10 countries. A possible “comprehensive deleveraging transaction” – in other words, a hefty whack for shareholders – has been a threat ever since Covid arrived.

Even pre-pandemic, the company was up to its neck in debt, having been run as an acquisition machine by chief executive Mooky Greidinger, who controls a fifth of the shares with his family. At the last count at the end of 2021, the debt figure was $4.8bn (£4bn), ignoring lease liabilities, which is one hell of a sum when revenues for the year were only $1.8bn.

One can, though, grumble about the narration from the boardroom. As recently as March, Greidinger was whistling cheerfully about how prospects were improving after all the temporary Covid closures. He was “encouraged” by recent trading and the business was “well positioned” to benefit from a “highly anticipated” schedule of new releases, such as Top Gun Maverick.

And now? Admissions are below expectations and that bountiful slate of new releases is deemed “limited” until November. Thus the talks with lenders that could deliver “very significant dilution” for current shareholders. Yes, that’s what happens with debt-for-equity swaps, as seen at rival Vue recently, or similar financial shake-ups. Cineworld’s shares plunged 60%, making the equity in the world’s second-largest cinema chain worth just £115m.

In one sense, one can admire Greidinger’s ability to maintain suspense this long. Last year he secured various covenant waivers on debt, negotiated with landlords and raised $213m by issuing convertible bonds. It was done even as Cineworld disputed with Cineplex, the Canadian chain it backed