Cineworld will close all its UK and US cinemas indefinitely, threatening tens of thousands of jobs, after the long-awaited next instalment in the James Bond franchise became the latest movie to be pulled by Hollywood studios.
Shares in Cineworld, which operates the Regal chain in the US alongside Cineworld and Picturehouse in the UK, closed down 36 per cent in London on Monday as investors feared for the future of the world’s second-biggest cinema group.
Led by chief executive Mooky Greidinger, Cineworld had been banking on high-profile releases, such as the Marvel film Black Widow and the latest instalment of Universal’s Fast & Furious franchise, to persuade consumers to brave cinemas even as Covid-19 infections climb again in the UK and parts of the US. Their release has been delayed until early 2021.
Hollywood studio MGM last week postponed the release of No Time to Die, which is Daniel Craig’s final outing as James Bond and was due to begin showing in cinemas on November 12.
Cineworld’s decision to temporarily suspend its operations in the UK and the US, which make up almost 90 per cent of its revenues, is the most brutal blow yet to an industry already reeling from the pandemic. Nigel Parson, an analyst at Canaccord Genuity, said the move “ratchets up the pressure on the studios to commit to their slates” of releases and he expected other chains to also shut screens.
About 45,000 jobs are under threat because of the closures, including 5,500 employees in the UK and 20,000 in the US, where Cineworld expanded with its $3.6bn acquisition of Regal Entertainment in 2017.
Cineworld, which has more than 530 Regal cinemas in the US and 127 in the UK, also has another 20,000 support staff on contracts.
In an email sent to Cineworld’s UK employees, Mr Greidinger said audiences had dwindled “to tiny and unsustainable levels and the delay of Bond has been a huge blow”, adding that it was reviewing the roles of all staff.
The UK government’s unwinding of its emergency furlough scheme to support wages had left Cineworld with an unsustainable burden given that it had “almost no income”, Mr Greidinger said in the email, a copy of which was seen by the Financial Times.
A source close to the business said that “substantial” job losses were likely.
Following news that Cineworld will close venues from Thursday, UK prime minister Boris Johnson urged the public to keep going to cinemas. “I’d encourage people to go out to the cinema, enjoy themselves and support those businesses,” he said.
Rival chain Odeon has already cut screenings at a quarter of its 120 UK and Irish venues to weekends only, while 16 of its cinemas remain closed. Vue, which operates 228 cinemas in 10 markets, said it was “exploring all options” and did not rule out site closures.
Cineworld’s aggressive expansion has left the group with $8.2bn in net debt. Analysts at Jefferies estimate that with its cinemas shut, Cineworld burns through about $60m a month. The group had roughly $150m in cash at the end of August as well as an undrawn $110m credit facility.
Last month, Cineworld warned that a prolonged or partial shutdown of cinemas in its key markets would lead to it breaching loan covenants.
It is in talks with a syndicate of 11 banks, including HSBC and Citigroup, in an attempt to waive those covenants and secure some breathing space.
The banks appointed the advisory firm FTI Consulting last week to advise on the talks, a move first reported by Sky News.
Are you under 30?
We are exploring the impact of the pandemic on young people and want to hear from readers between 16 and 30. Tell us about your experiences from the past six months via a short survey.
In a statement on Monday explaining the closures, Cineworld said it “cannot provide customers in both the US and the UK — the company’s primary markets — with the breadth of strong commercial films necessary for them to consider coming back to theatres against the backdrop of Covid-19”.
Mr Greidinger said Cineworld would only restart screenings “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 group, which slumped to a $1.6bn pre-tax loss in the first half of the year, said that “all liquidity raising options are being considered”.
It has already backed out of a proposed $2bn takeover of Canadian rival Cineplex due to the pandemic, prompting a legal fight.