PauL SCOTT comments - Stockopedia - CINE15 Dec 2021 16:23
My opinion - Google tells me that 1 Canadian Dollar is worth 59p, so C$1.23bn damages payable by Cineworld is about £730m - considerably more than CINE’s current market cap, so this is a seriously big deal. Is this liability enough to sink the company?
I’ve checked through the RNSs, and the last reported liquidity position was on 12 August 2021, with the interim results. This showed cash of $436.5m at end June 2021, plus another $200m term loan raised in July 2021, so $636.5m in total, or £482m in sterling. That’s not enough to pay the £730m damages, so I think CINE would need to raise yet more debt, and/or equity, to pay this fine.
The scale of its existing debt is mind-boggling. It had $4.86m gross borrowings at end June, so with the $200m new loan in July 2021, the total interest-bearing debt will now be over $5bn.
How much are its assets worth? There’s only $395m shown on the last balance sheet as land & buildings. The rest is leased. Plant & machinery of $861m probably doesn’t have that much resale value secondhand. So it’s a hopelessly insolvent balance sheet, with the only value coming from hope that cinemas can trade normally (and profitably) again at some point in the future, when the pandemic’s over. Or maybe some cinemas could be sold, to raise cash?
All in all, a dire situation. Therefore the equity is a pure gamble on CINE somehow surviving (maybe its appeal against the judgement might succeed)? Even if it does survive, at some stage this horrendous balance sheet will need to be refinanced.
I wouldn’t touch it with a bargepole, because the risk of a 100% loss is so high.
https://app.stockopedia.com/content/small-cap-value-report-weds-15-dec-2021-placeholder-914284?order=createdAt&sort=desc&mode=threaded
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