Shares in Cineworld Group PLC (LSE:CINE) tanked over 40% after the cinema operator cautioned fewer movie goers will hit liquidity and said it is considering a “deleveraging transaction” that could dilute the stakes of existing shareholders.
Recent admission levels have been below expectations, Cineworld said, blaming a lack of big-budget movies to draw in customers.
“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,” a statement said.
The movie-industry has been hit hard by disruptions caused by Covid-19, meaning fewer film releases this summer.
In addition, a number of films have been released direct to streaming – again hurting the cinema operator’s sales.
The heavily indebted group said it remains in funding talks with stakeholders and is evaluating options to boost liquidity and potentially restructure its balance sheet through a “comprehensive deleveraging transaction”.
Net debt stood at US$4.8bn at the end of 2021.
“Any deleveraging transaction will likely result in very significant dilution of existing equity interests in Cineworld,” it noted.
Cineworld is facing payment obligations to former disgruntled shareholders of US Regal and is also appealing against a Canadian court decision that requires it to pay C$1.23bn in damages to Cineplex.
Shares slumped 43.55% to 11.74p in midmorning trade.