National CineMedia, the largest movie-theater advertising business in North America, filed for Chapter 11 bankruptcy protection on Tuesday. The company has been struggling with the impact of the COVID-19 pandemic and a lack of major film releases. However, the company has also announced that it has entered into a restructuring agreement with its lenders.

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Debt to equity conversion in the restructuring

The restructuring agreement will see NCM's secured lenders convert all its debt into equity, with its holding company, National CineMedia Inc, receiving an ownership interest of approximately 14% in the restructured entity. The company filed for bankruptcy in the Southern District of Texas, with estimated assets in the range of $500 million to $1 billion and liabilities between $1 billion and $10 billion.

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Positive outlook for NCM

Despite the challenging advertising environment and the slow recovery of the box office, NCM's CEO, Tom Lesinski, expressed optimism, saying that the restructuring would position the company to deliver strong results for its advertisers and cinema partners now and in the future. This upbeat sentiment was reflected in the company's stock, which rose more than 60% to $0.33 on Wednesday. AMC Entertainment Holdings Inc also acquired a large stake, making it NCM's second-largest shareholder.

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Rebounding industry

The rebounding of the theater industry is also adding to the positive outlook for NCM. The company has forecast revenue of $91.7 million for the fourth quarter, a 44.4% increase, due to the rise in audiences returning to theaters. The Super Mario Bros movie's biggest opening weekend worldwide for a film release this year also helped rally movie theater stocks this week.

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Analysts predict a rise in shares post-restructuring

Wedbush analyst Alicia Reese believes that NCM is well-positioned within the ad delivery ecosystem, as theatrical attendance is beginning to meaningfully rebound. She predicts that shares will continue to rise as the company refocuses post-restructuring.

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