(Bloomberg) -- Cineplex Inc. tumbled after the company said it took a C$173 million charge as the Covid-19 pandemic shuttered movie theaters across the world.
Shares of the Toronto-based company plunged as much as 23% and finished the day down 19% to close at C$8.05, the lowest closing price since its 2003 initial public offering. On Monday evening, the company reported a loss of C$178 million for the quarter ended March 31. The loss included a writedown on property and other assets and the company acknowledged that the business will take a long time to recover from the pandemic.
“While it is impossible to predict how long this crisis will last and how significant the impact will be on our business, we know guests miss the magic of the big screen and sound,” Chief Executive Officer Ellis Jacob said in the quarterly statement on Monday.
Cineplex also announced it had struck an agreement with lenders to relax financial covenants as it deals with an uncertain future after a failed takeover.
Canada’s dominant chain of movie theaters said lenders will require it to raise C$250 million ($183 million) by the end of August. Some of the new money must be used to repay existing debt. The company shut all of its venues on March 16 and most remain closed, though it plans to open some outlets in six provinces starting on Friday.
Jacob said he remains optimistic about the firm’s business model.
“We had hiccups in the past and we worked together to make sure we come out much stronger and better as an organization,” Jacob said on BNN Bloomberg television. “The only risk is at the end of the day we don’t know how long this pandemic will last.”
London-based Cineworld Group Plc, the world’s second-largest cinema group, agreed last year to take over Cineplex for C$2.15 billion but scrapped the deal on June 12, alleging the Canadian company breached the terms of the agreement. Cineplex denied the claims. In a call with analysts Wednesday morning, Jacob said the firm will file suit against Cineworld “within the next week or so.”
The Cineworld takeover offer was for C$34 a share. Cineplex dropped as low as C$7.63 on Tuesday morning.
Both companies have seen their revenues crushed by the pandemic, with movie theaters across the world forced to close temporarily to slow the spread of the virus. Cineplex’s market value has plunged to about C$513 million, down from C$2.1 billion in February. Since the beginning of the outbreak, the company laid off staff and suspended dividends.
“As a result of Cineworld’s repudiation of the arrangement agreement, we focused on working with our financial partners to ensure that our long-term liquidity needs are met,” Jacob said in the statement.
As individual Canadian provinces have slowly begun to lift restrictions, Cineplex is gradually following. Six locations in Alberta have resumed operations, complete with reserved seating and other measures in place to ensure physical distancing. There are plans to also reopen theaters in British Columbia, Saskatchewan, Quebec, New Brunswick, Nova Scotia and Newfoundland and Labrador.
However, Jacob added on BNN Bloomberg that the delayed release of films such as Christopher Nolan’s Tenet and Disney’s Mulan have also impacted the reopening schedule.
(Updates share price move second paragraph. Previous versions of this story were corrected to show Cineplex had struck an agreement with lenders to relax financial covenants.)
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