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Regal owner Cineworld said Tuesday it would suspend its dividend payments and that top executives have “voluntarily” agreed to defer salary and bonus payments amid the coronavirus pandemic.
The London-headquartered company, the world’s second-biggest cinema chain, has closed all 787 sites in 10 countries as the world grapples with limiting the spread of COVID-19, the respiratory illness caused by the new coronavirus.
Cineworld’s board decided to suspend payment of the 2019 fourth-quarter dividend of 4.25 cents per share and upcoming 2020 quarterly dividends, while the company’s executive directors are deferring salary and bonus payments. Non-executive directors of the firm’s board will also defer their fees.
The company said the new measures were the latest part of its attempts to preserve cash amid the coronavirus crisis.
Cineworld lauded government initiatives to support jobs, saying: “We welcome the emergency support programs to protect jobs and business that have been announced in our markets and will access them as appropriate.”
The exhibition giant on Tuesday also mentioned that it was “discussing the group’s ongoing liquidity requirements” with the banks with which it has a credit agreement. It had last month warned that an extended shuttering of screens to contain the coronavirus could “cast significant doubt about the group’s ability to continue as a going concern,” a phrase that means it could go out of business.
S&P analysts Scott Zari and Rose Oberman on March 18 downgraded their debt ratings on Cineworld, saying cinema closures will “deplete its liquidity and covenant headroom.” They said they would consider a further downgrade once they get “more information on the duration of the cinema closures and the cost-cutting measures that Cineworld will undertake.”
Cineworld also emphasized on Tuesday that it continues “to monitor progress of the group’s proposed acquisition of Cineplex” in Canada, which some observers have suggested the company abandon amid the virus crisis. The firm has received shareholder approval for the $2.3 billion acquisition.
Said Cineworld: “Every effort is being made to mitigate the effect of the closures, to assist our employees and to preserve cash. These efforts include discussions with our landlords, the film studios and major suppliers, as well as curtailing all currently unnecessary capital expenditure. This is a painful but necessary process as before the onslaught of the COVID-19 virus, we were excited and confident about the group’s future prospects.”
Cineworld’s update is the latest from exhibitors as they deal with the pandemic’s financial impact. Cinemark said on March 30 that CEO Mark Zoradi and its board of directors would be forgoing their salaries amid the crisis while also mandating deep pay reductions for all U.S. corporate employees. On March 25, AMC Theatres had said it was furloughing all 600 corporate staff, including CEO Adam Aron.
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