Cineworld Share Price Dumped As Loan Repayment Default Looms

Summary:

The Cineworld share price is down again as the company seeks more time to repay disgruntled Regal shareholders.

The Cineworld share price is down 2.57% this Wednesday after facing rejection due to a failed breakout attempt at the 31.72p price mark. This comes as the company seeks a further delay to its debt repayments to former shareholders of Regal Entertainment.

According to a Reuters report, the company said it had approached former shareholders of its US Regal Entertainment division to extend the moratorium on debt repayment obligations it had earlier negotiated in February 2022. The world’s second-largest movie theatre company had promised a $170 million repayment to disgruntled shareholders of Regal Entertainment, who contested the $23 per share payment they received following Cineworld’s acquisition of Regal in 2017. The final repayments are due on June 30.

Cineworld is presently struggling under an $8.9 billion debt burden as it tries to get its business up and about following severe damage to revenues from the COVID-19 induced closures of its theatres. The company had financed the $3.6billion acquisition of Regal with a debt facility. A court ruling against it due to a botched deal with Cineplex further compounded the company’s financial situation. As a result, the Cineworld share price has endured a relentless selloff that sent its price from an 18 March 2021 high of 124.80p to 29.58p.

The triangle breakdown led to a measured move that touched off the support at 26.63 on 7 March 2022. The recovery rally was rejected at 39.95 (17 March high) before the move to the south resumption, taking out 31.72 (7-22 April lows) in the process. A return move to the broken support-turned-resistance has followed, with the new resistance shrugging off further bullish action.

This opens the door for a push southward, targeting 26.63 initially. If this new test of 26.63 succeeds and ends in a breakdown of this support, 23.49 (16/28 October 2020 double bottom) becomes the new downside target. The 5 October 2020 low at 15.55 forms an additional pivot if the bulls fail to defend the 23.49 support line.

On the flip side, a break of 31.72 is required to reverse the downside bias, opening the door towards the 28 March high at 35.07. Above this level, an advance takes the price activity towards 39.95 (28 January and 3 March highs) before 46.52 enters the mix as an additional northbound target.