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Oakland, to answer your question, if a company goes under, generally speaking the stock will be delisted and all assets are seized and sold.
Cineworld is in Chapter 11 bankruptcy, not to be confused with liquidation. They are essentially declaring that the company is concerned there is a risk of failure and so they can work collectively to help the company restructure and survive, it sounds much worse than it is. Currently they are getting some pretty good wins, including getting out of their lease agreements with sites that don't make them profit, meaning they can just up and leave the site and not pay any penalties or continue burning money on a non profitable site.
The next hurdle is their creditors, the people who loaned them money for things like the Regal acquisition. It's not uncommon for huge lenders to want to recoup some of their investment so they will work with Cineworld in order to claim back as much as possible, this could be by giving them better loan terms such as reduced interest rates, or grace period in for paying back the debt.
We just have to wait and see what happens, but I would be extremely surprised if one day they delisted without any prior warning as it is something we would likely see coming.
The fact is that Cinema is still profitable and by restructuring the business they should be able to recover in time. So they won't be burning bridges and letting the stock tank if there is money to be made.
@patiencebringsit
What makes you think it would be lights out for Cineworld, think about it, Cineworld lenders want to make a profit, they would have to not only continue the merge with Cineplex but would obviously set aside a large sum to prop up both companies until a full recovery. Otherwise they would lend Cineworld additional liquidity to purchase Cineplex for $3bn then have both collapse and lose their newly invested $3bn and their loaned money to Cineworld?
You make it sound as though that would be good for the lenders, they could lose everything...
If this were to happen, it would be good as it would ensure lenders have much more skin in the game and would be backed into a corner to provide more and more liquidity to help their investments survive. It would also mean after the recovery of a decent film slate, Cineworld would be the largest cinema provider and generate more revenue which in the long term would make the company as a whole more profitable.
It is not good news or bad news, it would only have a bearing if lenders did infect decide to purchase Cineplex as a way of avoiding the $1bn settlement, as at least this way their money spent brings in revenue as opposed to going to a third party. If this was the case, you can bet they will be providing much more than the needed $3bn purchase price because they would want both companies to survive so would provide additional liquidity to keep both trading.
To reiterate, I am not saying they will survive...
What I am saying is that so many people seem to be in a complete panic and assume this is already over. It simply isn't, once chapter 11 is filed they have over 3 months to continue trading without any risk of closure and can attempt a hail-mary to make some money again.
This is my point, everyone seems to act like this is already finished, whilst there is still, whilst extremely small, hope that they can come out of this.
I am aware that this is very likely to end badly, and I would not suggest anyone add more shares to their portfolio. I am just stating what can happen.
2/2
What we need is the backlog of films to be churned out bringing new and interesting stories to the big screen. A huge example of a well-made film that focused on a good storyline and acting is Topgun.
Cinema is here to stay, we just need the studios to continue producing films and focus on quality.
I see the biggest problem is studios focused on their big names first and halted production on potential films during COVID. Many of these films were poor and therefore failed which in turn meant a huge lack of backup films to be good.
I would also say, I can already see the same happening with Avatar 2!
BANKRUPTCY
Lastly, we look at the option of Chapter 11 bankruptcy. Many posts are not distinguishing the difference between Chapter 7 and Chapter 11. We may not be liquidating all assets to close doors, we will instead be focusing on reducing our debts and liabilities.
Let’s say Cineworld had half the debt, would anyone be panicking currently? Would this be seen as a company on the brink of collapse? The answer is no.
This is what Chapter 11 aims to provide. A new way out, is by restructuring and organising current debt and agreeing on new terms to allow for survival and growth.
Common examples of successful Chapter 11 filings include Hertz, GM, Texaco and Marvel Entertainment.
If this is unsuccessful we may be forced into a dilution, the argument here is not worth going over, we have no idea how much the shares would need to be diluted and it would be pointless to argue this case at this time.
If they only create an additional 1.1bn shares we could see a future fair price of half our 2019 levels at £1.40 - £1.60
Whereas if the dilution were to be 11bn more shares this would reduce our future value in relation to 2019 levels to £0.25p (Still much higher than our current valuation).
I think that dilution at this stage is very unlikely, it would mean a loss to all involved including large institutions and the BOD, many of whom could potentially save Cineworld with a cash injection.
Chapter 11, if/once filed provides us 120 days of trading to reorganise the business. During this time we will see a host of box office hits which may bring in the much-needed cash to continue our operations and pull us into a profitable model once again.
OVERALL
I think whilst the situation is not great, and I am clear this is not ideal. There is a huge amount of people who are overly negative regarding Cineworld. I am in no way saving Cineworld will survive, but this attitude of it’s already over is delusional.
There are still options available and given the lack of dividends, if Cineworld were to continue revenue on par with 2019 we could see a large reduction in their debt position.
1/2
There is a lot of speculation regarding Cineworld and the likelihood they will go bankrupt. Whilst this is a real risk, there is a clear over-exaggeration of their current position today and the actual likelihood they will survive.
Below, we will look into the current facts we know to assess the risk of bankruptcy and to get an idea of their survival likelihood;
DEBT
Cineworld's debt is a very hot topic when regarding takeovers and Cineworld's long-term survival. The numbers thrown around are all over the place, so we will confirm here. Their actual debt as it stands without lease liabilities is currently at $4.8bn.
Many are saying this is an enormous debt and will be the end of the company. This is simply false! Debt is a very common part of running any business at scale and in the grand scheme of things, this debt is far from too big.
To put their debt into perspective, I have seen multiple posts claiming that Cineworld won't even be able to pay off their interest rates let alone reduce their debt position. The average medium-large sized business loan hangs around the 1.9 - 2.9%APR.
If we use 2.9% for argument's sake, we can see their annual repayment of interest alone is $139.2m. This may seem like a large number in comparison to their cash position and their total income, but many are ignorant to the fact that Cineworld has stopped their dividend payouts which in 2019 when cinemas were running at their full capacity, totalled $520.2m.
A fraction of their dividend payments can be used to overpay their debt and reduce their position drastically over the next few years.
CINEMA SENTIMENT.
Another argument I have seen in mainstream media and across multiple posts is that “Cinema is dead, we can stream”. This has been proven to be incorrect time and time again, especially during the pandemic. Many studios made huge losses due to piracy on the day of release.
Not only this but many argue that the cost of visiting the cinema is too high. Whilst I agree the costs are fairly high, so are all activities these days. I see arguments time and time again that they will stream the films instead, however, with many new releases, this comes as an additional cost to your streaming subscription and normally sits around $20-35 per film.
This is no more than going to the Cinema, which many have shared is seen as a more enjoyable experience as it is a day out.
FILM LINEUP
One of the largest problems facing all cinemas currently is the lack of quality films. I see many people point to “big” films being released however, with the current woke culture and an overall lack of quality, many of these films are seen in a negative light. The focus on many films is to be seen to be woke or poorly made as opposed to having a solid storyline and a good cast with good acting, which has caused many flops such as Morbius, Lightyear and Fantastic Beasts to name a few.
Great point Huss, I couldn't agree more!
Whilst I am not sure when we will see the increase I do think two main factors are in play. The first is the obvious court case and the second is exactly as you mentioned, a distinct lack in films. Once we get a steady flow similar to 2019 of films being released I think we will see record profits.
Just a quick update on Cineworld, the domestic box office is currently sitting at 81.5% of 2019 levels.
I wanted to point out a reminder that dividends in 2019 totalled £450m to shareholders. At 80% of the box office, we can predict the value of the dividends currently would be around £360m. With the pause on dividends, Cineworld will retain all of these profits and can allow them to massively pay down its debt. This mixed with their cost-saving activities we could see these profits increase further. Don't forget this is just off the dividends, they generally pay off their debt on top of this so we could see them pay off the debt quickly with the dividends funds.
R.E Mooky, this is no news, he has a suspended sentence in Israel for a different business. This won't affect Cineworld and he can't use Cineworld funds to pay his debt. Not to mention, Mooky isn't the company, he simply is the CEO, if he were to come off the scene, Cineworld will still trade as usual.
People are blowing this out of the water, around 40% of the highest-paid CEOs in the US have been given fraudulent related fines or settlements. https://www.reuters.com/article/companies-pay-idUSL2N0GT0Y320130828
You may not have to agree with how business works, but you have to see this isn't out of the ordinary and at this level, people don't give a **** about what the CEO is doing, as long as they are making the shareholders money.
I believe we will see us moving into a favourable position, and whilst it may take a while for this to shoot the SP up, I and many of you are happy to hold and wait.
Hi Tegop,
Ill be honest, when it comes to the legality side of things, I know very little. Could someone explain in layman's terms how farfetched this judgement actually is so I can better understand the likelihood of the judgement being changed?
Just asking as I do not know, maybe someone here does.
Hypothetically, let's say the appeal comes around in October and the result is no change in the amount owed to Cineplex. Would Cineworld still be able to push through the purchase?
Cineworld were going to acquire Cineplex at a price of $34 per shares (Canadian dollars I believe, correct me if I'm wrong).
This sets the takeover price at £1,359,165,555. If it is possible to continue with the sale, is it possible to get a loan for the acquisition and gain a money making asset as opposed to just losing £782,000,000 in a legal battle.
Cineplex's gross profit prior to Covid-19 sat between $750M - $840M, with Cineworld working with them to revamp bad sites and build new sites, as well as cost saving measures. Would it not be financially sensible to go forwards with the acquisitions, if of course they can get the money loaned to go through with it.
As said, I am asking if this is even possible, can they move forwards with the acquisition at this point if they chose to?
What are other people's thoughts on the appeal in general also?
I think the main reason we are seeing huge drops is purely due to a lack of volume.
Whenever the price raises sharply you also see the volume almost doubles or sometimes more than doubles for that day.
What we need more than anything is a steady volume to keep the price up. How do we do this? By sharing the share with other people, I hear alot of people who believe in the stock and if thats the case, share your opinions with other people outside of this forum.
I noticed that this is one of very few, if not the only forum that actively discusses Cineworld. People talk about getting similar GME results, well get onto reddit and start sharing your views on the stock!
Also, I'm not sure if anyone else made the distinction between domestic box office and Cineworld revenue?
Their revenue always worked out to be on average about 35% of the domestic box office, during 2020 and 2021 it actually increased to over 40%, this could be due to the cost cutting actions taken by Cineworld but if that is still accurate we can predict we have made around £1.265bn so far this year.
This should hopefully allow us some headroom then with liquidity surely?
@Beta, so all they need is the liquid cash available?
Does anyone know the amount required?
Do they not have a requirement to tell us the results?
I think we are all missing my original question, what are the consequences for not reaching our target?
Are the consequences lessened if we almost reach it... etc?
Lat, I never said I was an expert. I am simply asking a question. That's why I am asking, what if we don't reach our base case set out by Cineworld, does this impact us massively?
UPDATE: These numbers are based on Domestic Box office figures so they are an estimate but should be very close to the exact figures. This also doesn't account for cost reductions Cineworld has made, but I assume they included that in their base case of 85%?
Hi All,
Just wanted to get people's opinions and feedback on the RCF covenant test in June. Based on Cineworlds base case they shared they predict Cineworld would have 85% revenues from 2019 and that they could pay off the test with headroom.
We currently sit at 61.86% of 2019 levels to date.
Do you think we have sufficient cash to pay down the test or do you think we will fail? And what do you think the affects of either situation be?
I'm not sure if its worth cashing out and rebuying after the test to be safe.
Are you referring to my post?
I haven't said anything about a low chance of winning against insurers?
Update on the Regal vs Insurers claim.
Regal is looking to claim from their insurers for an unspecified amount however, it is predicted to be around $650m for not paying out their insurance coverage during COVID-19
The court date is set for the 10th June 2022, infront of with Judge Stanley Blumenfeld Jr.
It will be interesting to see how this plays out as it could either cover a huge amount of the Cineplex case or pay off a large amount of the debt incurred during Covid-19.
Feel free to use this thread for updates on the case.
If anyone is interested, the case number is 2:22-cv-01248 and can be seen on https://dockets.justia.com/docket/california/cacdce/2:2022cv01248/844786.
Unpopular opinion, I don’t think avatar will be the biggest movie (domestically).
Also everyone is overlooking the huge black panther 2 film. Now that Chadwick Boseman has passed away, I think people will watch it more in his memory.
For those that didn’t know. Black panther 1 grossed $700 domestic.
I can see the sequel doing very neat to that due to the fan base it built so quickly.