Shares of Cineworld popped 23% after the struggling cinema operator announced that it has secured a new $450 million (£336 million) debt facility and will issue equity warrants as its theaters remain shut.
Cineworld (CINE) said that the additional liquidity will provide it with financial and operational flexibility until lockdown restrictions are eased and studios are able to bring back their pipelines of major releases back to the big screen. The UK’s biggest cinema operator, which had to shut its 127 cinemas across the UK and Ireland due to Covid-19, said it has implemented a number of operational steps to reduce its monthly expenditures to about $60 million (£45 million).
Specifically, Cineworld reached a deal with creditors for the terms of a new $450 million debt facility, which matures on May 23, 2024. After accounting for the new debt facility, the company will have aggregate gross debt financing of $4.9 billion with a weighted average interest rate of about 4.5%.
Alongside the new debt facility, Cineworld will issue 153,539,786 equity warrants to participating lenders, representing an aggregate 9.99% of the fully diluted ordinary share capital of the company assuming the full exercise of the warrants.
“The measures we are announcing today deliver over $750 million (£560 million) of extra liquidity to support our business. Over the long term, the operational improvements we have put in place since the start of the pandemic will further enhance Cineworld’s profitability and resilience,” said Cineworld CEO Mooky Greidinger. “The Group continues to monitor developments in the relevant markets in which we operate and our entire team is focused on managing our cost base. We look forward to resuming our operations and welcoming movie fans around the world back to the big screen for an exciting and full slate of films in 2021.”
For now, Cineworld expects a reopening of cinemas by no later than May 2021. The company added that under this base case scenario, it has sufficient headroom for 2021 and beyond.
Shares in Cineworld have soared 113% over the past month but are still down 72% on a year-to-date basis. The stock has a Hold consensus from the Street based on 1 Hold rating, 1 Sell rating and 1 Buy rating. That’s with an average analyst price target of 37.50p, implying 32% downside potential over the coming 12 months.
Last month, J.P. Morgan slashed the stock’s price target to 35p from 90p while maintaining a Hold rating. (See CINE stock analysis on TipRanks)
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