Telegraph Article13 Oct 2020 16:23
"Cineworld could run out of cash within weeks
Analysts say world's second-largest cinema group tapping shareholders for cash is unlikely as talks begin with lenders
By
Oliver Gill
13 October 2020 • 11:48am
Cineworld is just weeks from running out of cash and will need to raise $500m (£380m) from lenders to get through to next spring, analysts have warned.
The world’s second-biggest cinema group has opened talks with banks and other creditors after last week's shock decision to close all of its UK and US sites, putting 45,000 jobs at risk.
The chain has hired PJT Partners to assist in negotiations. Lenders appointed Houlihan Lokey and FTI Consulting ahead of what were expected to be tough negotiations of the heavily indebted company.
Cineworld took on debt with expansion
Bank of America, an adviser to Cineworld on its aborted £1.6bn acquisition of Canadian rival Cineplex earlier this year, said the roughly $400m the company had in the bank in June would not be enough to get it to Christmas.
Analysts at the US investment bank estimated that Cineworld would burn through about $420m in the second half of 2020, assuming its sites remain closed until the end of the year.
“This suggests the group could run out of cash in November or December,” they wrote.
Shares plunged more than 7pc to a new low of 27.4p, valuing Cineworld at £375m.
Bank of America said tapping investors for cash through a rights issue was “unlikely”.
Cineworld previously warned it would need to raise $200m to $300m from investors. But that was was before MGM decided to again delay the new James Bond film No Time To Die from November until April next year.
The company is hoping to renegotiate terms on its corporate overdraft - called an RCF, or revolving cash flow facility - and access additional support from taxpayers.
Kiranjot Grewal, a research analyst at Bank of America, estimated that about $500m of new funds would be required to get through the first six months of 2021.
“[If] no RCF extension [is] granted. This would be closer to $700m if the group start paying full rents from 2021 onwards,” the analyst added.
The warning came as it emerged that a US hedge fund could player a major role in Cineworld's fight for survival.
Centerbridge Partners provided the bulk of a $250m secured loan to Cineworld in June to enable the operator to weather the fallout from the first wave of coronavirus, Bloomberg reported.
The prospect of a US-headquartered Centerbridge, a distressed debt specialist, featuring in some of Cineworld's top ranking debt will further fuel City speculation that a debt-for-equity swap is on the cards.
Over the weekend Cineworld rival Vue said it would shut a quarter of its UK "
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