Cineworld shareholders to be wiped out under new restructuring plan
Shares in Cineworld tanked over 30 per cent this morning after the embattled cinema chain revealed that it would be forced to wipe out shareholders as part of its plan to exit bankruptcy.
The London-listed firm, which filed for bankruptcy in the US last autumn, said today that it has filed a “plan of reorganisation” with the US Bankruptcy Court in Texas.
The plan aims to help the beleaguered company reduce its $4.53bn (£3.68bn) debt pile in order to exit Chapter 11 insolvency during the first half of this year.
“In light of the level of existing debt that is proposed to be released under the plan, the proposed restructuring does not provide for any recovery for holders of Cineworld’s existing equity interests,” Cineworld said in a stock market announcement this morning.
Last week the chain revealed that it would be taken over by its creditors in a bid to restructure its debts and keep the struggling going.
The deal includes providing $1.46bn (£1.19m) in new debt financing and a new share offering of $800m (£649m), which will give its creditors a 100 per cent stake in the company.
Cineworld, which has 127 cinema houses in the UK and also owns cinema chain Picturehouse, was also forced to drop the sale process in its US, UK and Ireland businesses after it failed to find a buyer.
“Shareholders in Cineworld have had a tough time with this stock, which is down around 95 per cent over the last year,” Victoria Scholar, Head of Investment interactive investor, said.
David Greene, committee member of the London Solicitors Litigation Association, added: “Cineworld Group PLC shareholders will be smarting at the news that the value of their shares has been wiped out under plans presented to a Texas court to restructure debts and capital in a plan of reorganisation under Chapter 11 of the US Code.”