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Debt-laden exhibition giant Cineworld is considering bankruptcy after admitting to low admissions, according to reports.

The company, which owns Regal Cinemas in the U.S., has hired lawyers from Kirkland & Ellis LLP and consultants from AlixPartners to advise on the bankruptcy process, the Wall Street Journal said, citing people familiar with the matter.

“Cineworld is expected to file a chapter 11 petition in the U.S. and is considering filing an insolvency proceeding in the U.K.,” the Wall Street Journal said.

“All of our Cineworld and Regal theatres are open for business as usual, and we continue to welcome our guests and members to our cinemas globally,” Cineworld said in a statement. “As we announced earlier this week, we are proactively evaluating strategic options to ensure we have the balance sheet strength and flexibility to adapt to market conditions, and that process remains ongoing. We are committed to our customers’ experience and to being the ‘Best Place to Watch a Movie.’ ”

On Wednesday, Cineworld revealed lower than expected cinema admissions, which could potentially lead to equity dilution, they said.

“Despite a gradual recovery of demand since re-opening in April 2021, recent admission levels have been below expectations. These lower levels of admissions are due to a limited film slate that is anticipated to continue until November 2022 and are expected to negatively impact trading and the group’s liquidity position in the near term,” the Cineworld statement said on Aug. 17.

Cineworld said it was “taking proactive steps to ensure it has the balance sheet strength and flexibility to adapt to market conditions. This includes significant previously disclosed operational and financial initiatives to manage costs and enhance liquidity. The group believes these steps are required to optimize its ability to maximize enterprise value as part of the recovery in the cinema industry.”

“In connection with these initiatives, the group remains in active discussions with various stakeholders and is evaluating various strategic options to both obtain additional liquidity and potentially restructure its balance sheet through a comprehensive deleveraging transaction,” Cineworld said.

“Any deleveraging transaction will likely result in very significant dilution of existing equity interests in Cineworld,” the group warned.

The company recorded a $708.3 million loss before tax for the full year ending Dec. 31, 2021, a vast improvement from the $3 billion loss in 2020. However, the group’s net debt, excluding lease liabilities, increased by $492.7 million from $4.33 billion to $4.84 billion. In July 2021, Cineworld secured $200 million of additional liquidity via incremental loans.

Reacting to the reports of the bankruptcy filing, Philippa Childs head of creative industries union Bectu, said: “This is very worrying news, not least for the U.K.’s Cineworld and Picturehouse workforce who have already been through a tumultuous time during the pandemic. The U.K.’s cinema industry suffered an incredible blow due to COVID-19 and this latest news will be very unsettling for cinema workers. We will do everything we can to support our members during this challenging time and will be looking to Cineworld to mitigate the impact of any bankruptcy arrangements on its employees.”

In 2020, Cineworld’s plans to acquire Canadian chain Cineplex collapsed. Cineplex won a CA$1.2 billion judgment against Cineworld over the failed acquisition.

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