Shareholders in Cineworld, the UK-based cinema operator, will lose all their money when it begins converting debt into equity as part of a restructuring plan.
The plan is expected to see lenders convert debt of US$4.53bln alongside providing a US$1.9bln financing facility and funding an US$800mln equity rights issue.
In the cinema’s interim results last year, it revealed net debt had reached US$8.8bln.
The plan has been backed by lenders speaking for 83% of the group’s loans due in 2025 and 2026.
Shares tumbled by more than 30% on Tuesday to reach a record low of close to 1p.
Cineworld stated that it’s “business as usual” as it plans to continue with global operations and will honour any current existing membership programmes.
The company expects to emerge from the Chapter 11 process during the first half of 2023.
Cineworld currently has a 3.29% net short position, making it one of the most shorted London stocks.
Victoria Scholar at Interactive Investor said: “Cineworld was hit hard during the pandemic when cinemas were forced to close, Hollywood wasn’t churning out hits, and online video streaming growth exploded.
“Shareholders have had a tough time with this stock.”