Regal Cinemas to file for bankruptcy?

[Martin McCaffery]

https://www.cnn.com/2022/08/19/media/regal-cinemas-financial-trouble/index.html

The world’s second biggest movie theater chain is in trouble



London CNN Business —
The owner of Regal Cinemas is having a tough time — its stock crashedas much as80% Friday after reports that its parent company is preparing to file for bankruptcy.

British company Cineworld Group has spoken to lawyers at Kirkland & Ellis LLP to advise on the bankruptcy process in the United States and United Kingdom, according to a report by the Wall Street Journal.

The stock has recovered slightly, but is still 60% below its price at the start of Friday trading.

Earlier this week, Cineworld said in a press release that, despite a “gradual recovery of demand” since last spring, admissions were below expectations.

The company blamed a limited roster of films for the lack of moviegoers, a situation it expects to continue until the end of November.

The chain, which owns more than 500 movie theaters across the US, is exploring how to reduce its debt obligations, which it warned would “likely result in very significant dilution of existing equity interests” for shareholders.

Cineworld has struggled to stay afloat during the pandemic, when it was forced to close its movie theaters worldwide. It suffered a $2.7 billion loss in 2020, and $566 million loss in 2021.

It is a similar story for other movie theaters. So far this year, revenues at the US box office are nearly 30% lower than before the pandemic, according to Comscore despite a big rebound, a media data company.

Cineworld declined to comment to CNN Business on the reports that it is considering filing for bankruptcy. Kirkland & Ellis LLP did not immediately respond to CNN Business’ request for comment.

— Frank Pallotta contributed reporting.

[Frank Cox]

I've said here before, bankruptcy no longer means what it used to. Sell of the assets, wind up the company and turn out the lights seems to have morphed into merely writing off the debt and carry on with business as usual afterward.

So does this outfit (potentially) declaring bankruptcy mean anything changes in the industry or in the Regal-owned theatres?

[Leo Enticknap]

That's going to be the big question. I haven't seen in any of the coverage whether Cineworld's impending US bankruptcy filing is to be Chapter 11 (business reorganized, stockholders take it up the tailpipe, business carries on - pressing the reboot button, basically) or Chapter 7 (assets sold to pay off creditors, business ceases to exist). If it's Chapter 11, a judge has to sign off on whatever proposal is cooked up, which means, theoretically at least, that it has to stand a chance of success. Now that the Paramount Decree is no more, I'm wondering if one of the studios or streamers will swoop and try to gobble up Regal.

If it's Chapter 7 -

[Sam Chavez]

Why would anyone swoop in to gobble up Regal? They have some great but many more not so great locations. We have a lot of screens in the USA. I don't think all will survive.

[Mike Blakesley]

Depends on what a potential buyer can get it for. Maybe Amazon or Apple or Netflix will buy them. Boom, they're in the theater business without having to build infrastructure, and get to keep more of the the money.

[Sam Chavez]

Just speculating of course but I can see a buyer wanting specific sites but certainly not all of them.

[Mark Gulbrandsen]

I've said here before, bankruptcy no longer means what it used to. Sell of the assets, wind up the company and turn out the lights seems to have morphed into merely writing off the debt and carry on with business as usual afterward.

So does this outfit (potentially) declaring bankruptcy mean anything changes in the industry or in the Regal-owned theatres?

It all depends on if the bankruptcy attorney's can show the court that the company they represent is viable for restructuring. And if they can not show that, then the company assets are sold off to settle the debt. Not too long ago I saw on-line a theater chain that did not qualify to be restructured and they had all their assets listed that were for sale. Lots of S-1 stuff! I am pretty sure this chain was located mainly in So. California.

[Bobby Henderson]

I'm sure Cineworld and other commercial cinema chains are indeed being hurt by the major studios releasing fewer movies into theaters. This year's summer movie season has been pretty damned paltry compared past seasons before the global pandemic. The Top Gun sequel was a genuine global hit, but one hit movie is not nearly enough.

The entertainment press is deliberately overlooking another GIANT factor: the ridiculously short theatrical release window. That absolutely has to be killing movie theater business as well. Especially now with consumer price inflation being at pain levels not seen in 40 years. There is hardly any wait time at all between when a movie debuts in cinemas and when it becomes available for home viewing. The wait time is only around a month, if even that, for most new movies. Aside from that there is an immense amount of programming choices on traditional cable/satellite TV, streaming services and just random crap to watch on various mobile apps and web sites. There is no pain to the consumer for skipping a movie's theatrical release.

I think some great arguments could be made for increasing the theatrical release time window. Perhaps a bunch of these aging studio executives are still thinking of home vs cinema paradigms from 30+ years in the past. TV sets today are so much bigger and better than ever. And they don't cost nearly so much either. All of this stuff playing in theaters and at home is digital, some flavor of 2K or 4K. There is very little visual difference. It's nothing like the differences between a 35mm 'scope film print versus a small, square-shaped CRT box showing 480 to 525 lines of resolution. The only advantage commercial movie theaters have over the home anymore is content exclusivity. If viewers can save a lot of money by watching the same movie at home, in very similar levels of image/sound quality, many will choose to do that. They'll really choose to stay at home when prices of fuel, food, rent, etc are hurting their budgets. Cable and satellite TV providers are losing lots of subscribers in this high inflation environment. I think price hikes on some streaming services will force consumers to make some tough choices on which services to keep and which ones to cancel. 30 years ago the entertainment environment was far more limited. Commercial theaters were more dominant. At home there was a very limited number of broadcast channels, cable TV and (typically) a VHS deck. The Internet was in its earliest days, transferring data less than 56 kilobits per second. Today I'm getting well over 100 megabits per second on my phone.

Some people are cheering Cineworld and Regal falling into financial trouble due to the generally shitty way staff has been treated. With theatrical release windows being so short or even non-existent I would think just about any theater chain would be struggling no matter how well it was operated or how well it treated its employees.

Even if this bankruptcy is the usual Chapter 11 re-organization and debt-unloading ploy I would expect a lot of theater locations to close and the real estate under the theater buildings to be sold. Maybe selling the land is the real idea.

[Martin McCaffery]

Maybe selling the land is the real idea.

Maybe. I'm curious to see how much land they actually own. I remember back in 2020 when New Visions, which bought up the theatres AMC had to divest from, liquidated and AMC wanted to get some of them back. Claimed they were still paying rent on them anyway. If Regal has a bunch of long term leases instead of outright owning, the land isn't worth a thing to them unless they can sublet.
"Location, Location, Location, tear it down and build something else that you can dispose of in a few years."

[Mike Blakesley]

That’s what Carmike did with its three former locations in Billings. The buildings were built to suit, leased for like 20 or 30 years, then abandoned. Most have been replaced with other buildings now. Currently they have 2 locations, one about 25 years old and one maybe 10 or 12. I’m sure the older one will be put out to pasture in the next decade or so.

[Martin McCaffery]

I expect AMC will be shutting down/off loading many of their old Carmike theatres very soon. I look forward to outlasting one last chain in Montgomery before I retire.

[Leo Enticknap]

Not too long ago I saw on-line a theater chain that did not qualify to be restructured and they had all their assets listed that were for sale. Lots of S-1 stuff! I am pretty sure this chain was located mainly in So. California.

If you mean Pacific/Arclight, my understanding is that it didn't go bankrupt at all: the chain's owner (Decurion) decided not to repoen all but one of the sites after the covid shutdown, and wind up the business. The one remaining site (that hasn't been demolished and/or re-leased, and therefore potentially could be reopened as a movie theater) is the Arclight next to the Cinerama Dome, and I keep hearing conflicting rumors and reports as to whether it will reopen or not.

Why would anyone swoop in to gobble up Regal?

As Mike wrote, one of the newcomers (or traditional studios, newly released from their post-Paramount Decree ban on owning theaters) might want it more as a marketing tool than a profit-making business center in its own right. And as Martin noted, very likely not all (or even most) of the existing Regal sites would survive such a change of ownership. Of course this is all complete speculation, given that the rumored bankruptcy hasn't happened yet.

[Bobby Henderson]

If Regal has a bunch of long term leases instead of outright owning, the land isn't worth a thing to them unless they can sublet.

That's true, but there's still another angle to play even if they're leasing. A bankruptcy filing can be Regal's parachute out of long term leases for locations that are not making enough money (or even losing money). The landlord would have to negotiate better terms to convince them to stay or find a new tenant.

That’s what Carmike did with its three former locations in Billings. The buildings were built to suit, leased for like 20 or 30 years, then abandoned. Most have been replaced with other buildings now. Currently they have 2 locations, one about 25 years old and one maybe 10 or 12. I’m sure the older one will be put out to pasture in the next decade or so.

The old Carmike 8 building here in Lawton (opened late in 1994) is supposedly being remodeled into some kind of church. I remain skeptical about the operation. The building has been boarded up for a few years. I'm guessing anyone doing renovation work may have a fun time dealing with mold and mildew removal.

I expect AMC will be shutting down/off loading many of their old Carmike theatres very soon.

AMC shut down a bunch of the old Carmike locations right after taking ownership of the chain. Here in Lawton our old Carmike 8 was running as a bargain discount theater due to Carmike opening the newer Patriot 13 & IMAX. AMC shut down the Carmike 8. AMC had our old Central Mall 12-plex theater, but chose to divest that when it had to sell off theaters for the Carmike buy-out. The 12-plex in the mall didn't last too long after that.

[Leo Enticknap]

In the San Bernardino Sun:

The owner of Regal Cinemas is having a tough time — its stock crashed as much as 80% Friday after reports that its parent company is preparing to file for bankruptcy.

British company Cineworld Group has spoken to lawyers at Kirkland & Ellis LLP to advise on the bankruptcy process in the United States and United Kingdom, according to a report by the Wall Street Journal.

The stock has recovered slightly, but is still nearly 60% below its price at the start of Friday trading.

Earlier this week, Cineworld said in a press release that, despite a “gradual recovery of demand” since last spring, admissions were below expectations.

The company blamed a limited roster of films for the lack of moviegoers, a situation it expects to continue until the end of November.

The chain, which owns more than 500 movie theaters across the US, is exploring how to reduce its debt obligations, which it warned would “likely result in very significant dilution of existing equity interests” for shareholders.

Cineworld has struggled to stay afloat during the pandemic, when it was forced to close its movie theaters worldwide. It suffered a $2.7 billion loss in 2020, and $566 million loss in 2021.

It is a similar story for other movie theaters. So far this year, revenues at the US box office are nearly 30% lower than before the pandemic, according to Comscore despite a big rebound, a media data company.

Cineworld declined to comment to CNN Business on the reports that it is considering filing for bankruptcy. Kirkland & Ellis LLP did not immediately respond to CNN Business’ request for comment.

Regal has 32 locations in Los Angeles, Orange, Riverside and San Bernardino counties, according to its website.

[Frank Cox]

https://www.theglobeandmail.com/busi...uptcy-top-gun/

This summer, fighter pilot Pete (Maverick) Mitchell thwarted a rogue nation’s nuclear ambitions, won a heroine’s heart and rescued theatre chains by bringing audiences back to the movies.

Top Gun: Maverick’s blockbuster success – worldwide ticket sales are through US$1.3-billion – helped boost attendance at North American multiplexes to 75 per cent of pre-COVID-19 levels. With a solid pipeline of new releases coming this fall and next year, executives and analysts were optimistic on the prospects for Cineplex Inc., the dominant domestic chain, and U.S. rivals AMC Entertainment Holdings Inc. and Cinemark Holdings Inc. when the companies recently reported financial results.

Yet one cinema operator seems immune to Tom Cruise’s charms.

U.K.-based Cineworld Group PLC is pleading poverty at a time when most chains are celebrating the return of movie magic. In a statement last week, the owner of more than 9,000 screens said recent admission levels have been “below expectations” owing to a limited slate of films. Cineworld said a financial restructuring may be required.

On Monday, the company detailed its plans, saying in a statement: “The strategic options through which Cineworld may achieve its restructuring objectives include a possible voluntary Chapter 11 filing in the United States.”

Why is Cineworld taking a pessimistic view when most chains are forecasting a Hollywood ending to the financial woes that came with the pandemic? The company is setting the stage for a showdown with lenders and jilted takeover target Cineplex.

Cineworld chief executive Mooky Greidinger built the world’s second largest cinema operator through a series of debt-financed takeovers, including a US$3.6-billion acquisition of U.S. rival Regal Entertainment in 2017. The company’s most recent financial statements show it owes lenders more than US$5-billion.

On top of its debt, an Ontario court ordered Cineworld to pay $1.24-billion to Cineplex last December for breaching its$2.18-billion agreement in 2019to acquire the Canadian company. Cineworld subsequently appealed the decision.

In the past, Mr. Greidinger played hardball with rivals over industry issues such as film distribution rights. He now seems intent to use the pandemic’s impact to rework loans and, potentially, the terms of the Ontario court settlement.

Cineworld will win concessions, according to analysts. Prior to the U.K. chain’s recent announcements, analyst Maher Yaghi at Bank of Nova Scotia valued the court decision at $124-million (10 per cent of the actual award) when he calculated a target price for Cineplex’s cineplee. In a report last Friday, he cut that estimate to zero.

“While it is hard to predict what form the balance sheet restructuring will take and potential impact on a settlement with Cineplex, we feel it is prudent at this time to remove any remaining value that we had in our target price coming from Cineworld,” said Mr. Yaghi.

Other Bay Street analysts also say they’ll only count the cash from the court decision when it arrives in Cineplex’s account. However, investors clearly ascribed some value to the settlement, as Cineplex’s stock price is down by 14 per cent since the U.K. company revealed restructuring plans.

Cineplex plans to fight for what the courts said it is due. Earlier this year, the company hired experts in restructurings – boutique investment bank Moelis & Co. and law firm Goodmans LLP – to extract as much value from the legal settlement as possible. On Monday, the Canadian company declined to comment on Cineworld.

At Cineworld, the stage is now set for a restructuring with dogfights to rival the last few minutes of the Top Gun sequel. Mr. Greidinger is fighting for his family’s fortune. Cineworld’s CEO and his family are the single largest shareholders in the chain, with a 20-per-cent stake. In its statement last week, Cineworld said: “Any deleveraging transaction will likely result in very significant dilution of existing equity interests in Cineworld.” In June, another U.K. chain, Vue International Bidco PLC, emerged from a recapitalization that saw creditors end up with 100 per cent of the company’s equity.

The crowds turning out to see Maverick and his fellow fighter pilots strut their stuff show that movies in theatres still draw audiences, and there’s a profitable postpandemic future for chains. At Cineworld, the question is who will be at the controls when that Hollywood ending plays out.