Canada's Cineplex to Shutter Theaters Until April 2 Amid Coronavirus Pandemic

Courtesy of Cineplex Entertainment
Scotiabank Theatre Toronto

The exhibitor also warned that "prolonged closures" threaten the debt terms of its $2.1 billion pending takeover deal with Cineworld.

Canadian exhibition giant Cineplex will be shutting down all of its locations until April 2 amid the coronavirus pandemic.

The circuit operates 165 cinemas with 1,695 screens nationwide and is closing them "in an abundance of caution" over the spread of COVID-19 and following Canadian government directives, the company said Monday.

And in a letter to investors, Cineplex also warned the debt conditions of its $2.1 billion, $34-per-share takeover deal with Cineworld Group could threaten that transaction being completed. The Dec. 16, 2019 agreement between Cineplex and Cineworld required the Canadian chain to have no more than $725 million in outstanding debt.

Cineplex revealed it was cutting costs to avoid breaching its debt covenants. "In response to declining attendance and certain government-directed shutdowns of places of public gatherings including theatres, Cineplex is managing its business to reduce expenses in an amount necessary to offset declining revenues so that Cineplex is supporting its business and would be in a position to satisfy the debt condition," Cineplex told investors.

"The possibility of prolonged closures could impact the ability of Cineplex to mitigate the related revenue decline and satisfy the debt condition or other of the remaining conditions by the outside date," it warned.

The Canadian company said it still hoped to satisfy all conditions to close the Cineworld Group transaction by June 30. But stock in Cineplex on Monday tumbled just over 54 percent to $9.33 on the Toronto Stock Exchange, well below the $34-per-share deal offer, as short sellers continue to bet the takeover by Cineworld will not go ahead.

Cineworld last year acquired U.S. cinema powerhouse Regal, which on Monday said it will be shutting down its 543 U.S. locations until further notice amid the coronavirus spread. Cineworld subsequently acquired Cineplex to expand its brands to include Regal, Picturehouse and Cinema City.

Rival Canadian chain Landmark Cinemas also announced it will shutter its 46 theaters amid the coronavirus crisis, without putting a date on their reopening. "We will continue to adhere to the directives of federal, provincial and municipal health authorities and will reopen when it is deemed appropriate," the company said in a statement.

March 17, 8 a.m. Updated with announcement by Landmark Cinemas that has closed down its 46 theaters.