Regal Owner Cineworld Expects to Reopen Cinemas in July, Boosts Liquidity

Courtesy of Cineworld
Cineworld

The company also gets a debt covenant waiver, saying it will have "sufficient headroom to support the group even in the unlikely event cinemas remain closed until the end of the year."

Exhibition giant Cineworld, which owns the Regal circuit in the U.S., said Thursday it expects to reopen its cinemas in July and received a waiver from its lenders on a debt covenant amid the novel coronavirus pandemic. It also raised additional liquidity, saying that would allow it to make it through the end of the year.

Lenders "agreed to waive the leverage covenant in respect of its credit facility for the June 2020 testing date and has increased its leverage covenant to 9.0x net debt to EBITDA for the December 2020 testing date," the firm said.

The company also agreed the terms of $110 million of additional liquidity through an increase in its revolving credit facility. In addition, Cineworld said it "has secured credit committee approval to apply for an additional $45 million through [a] loan scheme in the U.K. and expects shortly to commence a process to access $25 million through the U.S. government CARES Act." 

The company concluded: "Cineworld expects that this additional liquidity, to the extent required, will provide it with sufficient headroom to support the group even in the unlikely event cinemas remain closed until the end of the year."

Cineworld anticipates that government restrictions related to cinemas will be lifted in each of its territories by July and "anticipates the reopening of all of its cinemas in July." It said it "has put in place procedures to ensure a safe and enjoyable cinema experience for its employees and customers."

Cineworld also said it was "excited by the great movie lineup to follow the reopening of cinemas, starting with the highly anticipated new Chris Nolan movie Tenet and immediately after that with Mulan."

Cineworld during the first half of March said it had drawn up potential downside scenarios for extended cinema closures due to the virus, with a particularly dire one of extended cinema shutdowns posing a risk that it could breach its debt covenants. If it then didn't manage to negotiate new terms with lenders, this could "cast significant doubt about the group’s ability to continue as a going concern," a phrase meaning it could go out of business.

Soon after, the London-headquartered company, the world's second-biggest cinema chain, closed all 787 sites in 10 countries as the world grappled with limiting the spread of COVID-19, the respiratory illness caused by the new coronavirus. It has put U.K. workers on furlough.

In early April, Cineworld then said it would suspend its dividend payments and that top executives  "voluntarily" agreed to defer salary and bonus payments to preserve cash amid the pandemic.