By Elizabeth Haigh For Mailonline

Published: 08:34 EDT, 19 August 2022 | Updated: 09:49 EDT, 19 August 2022

Cineworld Group Plc, the owner of Cineworld cinemas in the UK and Regal Cinemas in the US, is reportedly preparing to file for bankruptcy within weeks after struggling to rebuild attendance from pandemic lows.

The British cinema company has engaged lawyers from Kirkland & Ellis LLP and consultants from AlixPartners to advise on the bankruptcy process, an inside source told the Wall Street Journa l.

It comes after Cineworld announced on Wednesday that performance since April 2021 was 'below expectations'. 

Since the rumours came to light Cineworld Group's share price crashed to just 2p, before slowly rising to around 3p. 

The company has 127 branches in the UK alone, meaning thousands of jobs could be at risk. It has 751 branches in total.

Cineworld currently operates in the UK, Ireland, Poland, the Czech Republic, Slovakia, Hungary, Bulgaria, Romania, Israel and the US, employing 28,000 people in total.

The chain had to be rescued by investors during the coronavirus pandemic when all its branches had to close. They placed 5,500 staff on furlough and carried out both voluntary and compulsory redundancies. 

The owners of Cineworld, Cineworld Group Plc, are understood to be considering filing for bankruptcy in the UK

Avatar 2, The Way of Water, was originally supposed to be released in 2020. It is now set to be released in December of this year

Top Gun Maverick starred Tom Cruise, Lady Gaga and Miles Teller. It came out this summer after being put back by nearly two years.

The company had been banking on major blockbusters to boost recovery after the end of lockdown - but the pandemic meant the film industry struggled to make scheduled films on time.

Major films which had been promised to have been released by now such as Avatar 2 and Avatar 3, have still not hit box offices.

And long-anticipated action thrillers such as the latest James Bond film and Top Gun Maverick were also seriously delayed.

Top Gun Maverick was released in May of this year after an almost two-year delay from June 2020.

Meanwhile No Time To Die, the latest Bond movie featuring Daniel Craig, was delayed by 18 months, from March 2020 to September last year. 

Two years of disrupted film-making plus the pushback of major film releases has meant fewer films to choose from for all cinemas. 

In January 2021 Cineworld bosses faced a backlash from shareholders over a scheme which could have awarded senior leaders with up to £208million in share awards.

It came just two months after the company secured an extra £560million from the British government in November, which they said was needed to weather the coronavirus pandemic. 

Cineworld Group's revenue comes mainly from the US, which provides 68 per cent of income, compared to 19 per cent for the UK and Ireland and 13 per cent for the rest of the world. 

Its chief executive could receive £65million alone after investors holding just over 70 per cent of shares voted for the new long-term incentive plan. 

The plan would have seen chief executive Mooky Greidinger get a £33million payout if Cineworld's share price hit 190p within three years - back to levels it was at prior to the pandemic.

To unlock £65million it would have had to hit 380p. 

Neither of these bars have been met by the company since April 2021. 

Cineworld is expected to file a chapter 11 petition in the U.S. and is considering filing an insolvency proceeding in the U.K., they added.

The pandemic saw cinemas closed across the world during the pandemic due to the risk of the spread of coronavirus.

Some cinema companies were already struggling to retain audience numbers due to highly competitive online screening services.

It seems the reopening of cinemas has not helped improve visitor numbers, leading to major chains such as Cineworld coming under increasing financial pressure.

The British company only narrowly avoided bankruptcy in 2020 after last-minute support from creditors while its 800 branches were closed due to covid. 

In a statement on the group's website on Wednesday, the cinema owner said that recent audience figures were below its expectations, and it expected the company to suffer significant 'dilution of equity interests' in the near future: 'Despite a gradual recovery of demand since re-opening in April 2021, recent admission levels have been below expectations.

'These lower levels of admissions are due to a limited film slate that is anticipated to continue until November 2022 and are expected to negatively impact trading and the Group's liquidity position in the near term.'

The statement continued: 'In connection with these initiatives, the Group remains in active discussions with various stakeholders and is evaluating various strategic options to both obtain additional liquidity and potentially restructure its balance sheet through a comprehensive deleveraging transaction. 

'Any deleveraging transaction will likely result in very significant dilution of existing equity interests in Cineworld.'

The new development suggests any recovery the company had been hoping for as it entered crisis talks this week is not in sight. 

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown said: 'This is the latest twist in what's been a Covid horror story for Cineworld after it failed to lure back enough movie goers to help pay back its enormous debts. 

'The UK company which owns movie chains around the world was desperate for a slew of hits to help revive its fortunes but they have been few and far between. 

'Hopes had been raised that first spies, then superheros, then fighter pilots would prove to be the magic bullets for the company but there simply haven’t been enough blockbusters coming through to to break the spell of misfortune.

'Chapter 11 is considered to be a highly complex form of bankruptcy and would ordinarily only be undertaken if the company had exhausted all other avenues. It seems the discussions Cineworld had entered into earlier this week with stakeholders to obtain additional funding have not borne fruit but if it does file for bankruptcy, it’s unlikely to be the final chapter for the company. 

'This type of bankruptcy known allows a company to stay in business and restructure its debt obligations but the plan has to be in the best interest of its creditors.' 

Cineworld Group Plc has been contacted for comment. 

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