Theater advertiser National CineMedia files for bankruptcy protection

National CineMedia LLC, the biggest movie-theater advertising business in North America, filed for Chapter 11 bankruptcy protection on Tuesday and said it had entered into a restructuring agreement with its lenders.

The announcement follows a similar move by British theater chain Cineworld in September and underscores the challenges facing the cinema industry, which is yet to bounce back from the pandemic slump and a dearth of major film releases.

Under the restructuring, NCM’s secured lenders will convert all its debt into equity; its listed holding company, National CineMedia Inc NCMI.O, will receive an ownership interest of about 14% in the restructured entity.

NCM filed for bankruptcy in the Southern District of Texas, listing its estimated assets in the range of $500 million to $1 billion, and liabilities between $1 billion and $10 billion.

“(The) transactions will position us to deliver the strong results our advertisers and cinema partnershave come to expect from us today and well into the future,” Tom Lesinski, CEO of National CineMedia Inc, said in a statement on Tuesday.

Shares of the holding company rose more than 60% to $0.33 on Wednesday, having jumped 55% a day earlier after AMC Entertainment Holdings Inc AMC.N disclosed it had acquired a large stake, making it NCM’s second-largest shareholder.

NCM was the second most traded U.S. stock by retail clients at 10:30 a.m. ET, according to J.P.Morgan data.

Some analysts attributed the jump to the company’s upbeat prospects, given signs that audiences were finally returning to theaters after a tough two years for the industry.

In its filing, NCM forecast revenue of $91.7 million for the fourth quarter, a 44.4% increase; movie theater stocks have rallied this week after the Super Mario Bros movie marked the biggest opening weekend worldwide for a film release this year.

“Despite a difficult advertising environment and a still-recovering box office, NCM is well-positioned within the ad delivery ecosystem, as theatrical attendance is beginning to meaningfully rebound,” said Wedbush analyst Alicia Reese.

“Ultimately shares will rise as the company refocuses post-restructuring.” Reuters