Cineworld Group Plc said it will temporarily suspend operations at all its American and British movie theaters now that crucial income from winter blockbusters has been pushed into 2021 by the coronavirus pandemic.
The world’s second-biggest cinema chain will on Thursday close its 536 Regal theaters in the U.S. and its 127 British locations, including the Picturehouse brand, affecting about 45,000 employees, the company said in a statement Monday.
After dropping as much as 60% the shares pared losses to a 39% decline at 12:08 p.m. in London. They’ve declined about 89% so far this year.
It is now “almost certain” that Cineworld will have to raise additional funds, Natasha Brilliant, an analyst at Citigroup Inc., wrote in a note to clients Monday. The London-listed chain has already said that all funding options are being considered to weather the pandemic, including obtaining around $200 million to $300 million of new funds.
“With a prolonged period of closure, the group would need additional funding from January 2021, when the current revolving credit facility ends,” and the amount raised could be as much as $500 million, Brilliant wrote. “Our concern is that this may be financed at a significant cost.”
The company’s debt soared to $8.5 billion from just $467 million in 2017 as it pursued an international expansion.
Its announcement Monday came after Metro-Goldwyn-Mayer on Friday delayed the release of the new James Bond movie for the second time, pulling the plug on one of the few big films left on the 2020 release calendar.
Cineworld “cannot underscore enough how difficult this decision was,” Chief Executive Officer Mooky Greidinger said in the statement. Cineworld will aim to reopen “when key markets have more concrete guidance on their reopening status and, in turn, studios are able to bring their pipeline of major releases back to the big screen.”
The company re-opened cinemas in July “full of optimism,” but the delay of the Bond film was “a huge blow,” Greidinger said in an email to staff, circulated on social media and confirmed by the company.
The internal message also said Cineworld is reviewing all roles to see if any can be supported with government funding.
“The new government scheme places a greater financial burden on employers, which cannot work for us when we have almost no income,” the email said, referring to U.K. fiscal support. “We will do everything we can to save livelihoods and the company – this is an extremely delicate and tricky balance.”
The company had 30,000 employees at the end of 2019, according to its annual report, and also uses contract workers for jobs such as cleaning and security. A spokeswoman for the company declined to comment on the cuts or measures to reemploy staff.
Monday’s announcement reverses Cineworld’s reopening after the end of the first surge of coronavirus cases. Some 561 of its 778 sites had opened as of Sept. 24. It comes as it faces legal proceedings from Toronto-based Cineplex Inc. after it backed out of a deal that would have created the biggest operator of movie theaters in North America.
BECTU, a union which represents Cineworld staff, lay blame for the closures at the feet of movie distributors delaying their releases.
“Cinemas are currently able to operate safely, so this decision is entirely the result of distributors choosing to delay the release of blockbusters in the hope of making extra money further down the line,” said Philippa Childs, the head of the union. “This is short-sighted in the extreme, and if other chains follow Cineworld’s lead it’s hard to see how there will be a fully functioning industry to return to in six months’ time.”
The union will “pressurize distributors to follow Christopher Nolan’s lead in bringing pictures forward to help maintain a functioning cinema industry,” she added, referring to the director of the main summer blockbuster released this year amid the pandemic, ‘Tenet’.
— With assistance by Lisa Pham, and Adeola Eribake
(Updates with chart, latest share price, CEO letter to staff and union quote)