Cineworld, one of the world’s largest cinema chains, is considering a company voluntary arrangement (CVA) for its British operations as a potential solution to its financial struggles amid the COVID-19 pandemic. The company, which has been in talks with prospective buyers, has enlisted the help of restructuring experts at AlixPartners to explore this option.
A CVA is a mechanism commonly used by retailers and restaurant chains to close stores and reduce rental costs. While the details of Cineworld’s potential CVA are still being determined, it is unclear whether any site closures or rent negotiations with landlords will be involved. However, an insider has revealed that a CVA is now more likely than an outright sale of the business.
Earlier this month, Sky News reported that Cineworld had brought in AlixPartners to consider a sale. The company operates more than 100 sites in Britain, including the Picturehouse chain, and employs thousands of people. However, the exact number of employees has not been confirmed by Cineworld’s public relations adviser.
In a statement to Sky News, the company stated, “Like many businesses, we are continually reviewing our UK operations.” Cineworld, which was once led by the Greidinger family, has grown into a global industry giant through acquisitions such as Regal in the US in 2018 and the British company of the same name four years earlier. However, its massive debt burden led to a crisis, forcing the company to file for Chapter 11 bankruptcy protection in 2022. Last August, it delisted from the London Stock Exchange due to a significant drop in its share price.
In 2020, Cineworld reached a deal with its creditors to exchange several billion dollars of debt for shares, with additional funding from a group of hedge funds and other investors. The company also has operations in central and Eastern Europe, Israel, and the US.
Since emerging from bankruptcy protection, Cineworld has appointed a new leadership team, with Eduardo Acuna, former head of Mexican cinema chain Cinepolis’s operations in the Americas, taking on the role of chief executive. Eric Foss, a former Pepsi executive, has been appointed as the company’s chairman.
According to a source in the property industry, any attempt by Cineworld to pursue a CVA or other restructuring that compromises landlords is likely to face strong resistance. As the summer season approaches, the company is gearing up for major film releases such as Despicable Me 4, A Quiet Place: Part One, and Alien: Romulus.
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