Written by Norman Isaac Mwambazi

AMC CEO says “the sun is shining” so bankruptcy is “off the table” after $917m fundraising

One of the businesses that have been hit hard by the COVID-19 pandemic is the theatre. Studios have postponed new …

One of the businesses that have been hit hard by the COVID-19 pandemic is the theatre. Studios have postponed new releases of their movies and most of those that have been released, have gone straight to the streaming services as people have been confined to their homes, unable to go to the theatres due to the lockdowns.

One company that has been hit the most is the AMC Entertainment, which owns operates over 1000 theatres worldwide has had attendance drop to over more than 90 per cent due to the pandemic, forcing the company to almost slip into bankruptcy.  

However, there is good news. Adam Aron, the Chief Executive Officer of AMC Entertainment has said that imminent bankruptcy is “off the table” after securing close to $1 billion across debt and equity markets over the past month. 

AMC unveiled a new £400 million lending facility on Monday, January 25, 2021, backed by the assets of its UK subsidiary Odeon Cinemas Group. The new loan expands an existing £100 million facility at a hefty interest rate of 10.75 per cent for the first year and 11.25 per cent for the remainder of its two-and-a-half year maturity. 

Alongside equity sales and $100 million borrowed from Mudrick Capital Management through the sale of risky payment-in-kind notes, which carry an interest rate up to 17 per cent, the company said it has raised $917 million since mid-December. 

“Today, the sun is shining on AMC, any talk of an imminent bankruptcy is completely off the table,” said Aron.

By AMC’s own calculations, it would give the company enough cash to survive until July of this year, assuming no increase in attendance levels. As earlier mentioned, AMC suffered a slump in attendance of more than 90 per cent in the fourth quarter, compared with the same period in 2019, and burnt through an average of $124 million a month. 

The company said it would need attendance to rise to 10 per cent of pre-coronavirus levels in the first quarter, 15 per cent in the second quarter, 65 per cent in the third quarter, and 90 per cent in the fourth quarter to see out the year with its current funds. 

The need for a rapid return by cinemagoers has left some investors sceptical of AMC’s long-term survival. AMC’s stock price was up almost a quarter in early trading, but remains about a third below where it started 2020. 

The company’s existing bonds are still trading at distressed levels, despite a recent rally. Debt maturing in 2026 that was raised last year as part of an emergency fundraising is still changing hands below 50 cents on the dollar, despite rising from close to 20 cents on the dollar at the start of the year. 

John Dixon, a high-yield bond trader at Dinosaur Financial Group said: “I just don’t see folks rushing back to the cinema. The pandemic accelerated a shift already under way from cinemas to streaming.”

He added: “The seats in my apartment were more comfortable, the popcorn and sodas were a fraction of the price, I could pause the movie if needed to go to the bathroom, and I didn’t need to fret about getting COVID.”

Tim Richards, chief executive of Vue International, which operates in 10 markets, told a call with analysts this month that he was confident demand for cinema releases would return but did not expect box office revenues to rebound to 2019 levels until the second half of 2022.

Last week, MGM decided to delay its much-anticipated James Bond film No Time To Die until October this year for the third time during the pandemic. The release is seen by many in the industry as a bellwether for the resumption of movie-going.

The move came after Warner Bros decided to release all of its 2021 films for streaming at the same time as in cinemas and the announcement by Netflix that it planned to release more than 70 films on its platform this year.

According to the Financial Times, AMC noted that the borrowing announced on Monday was contingent on agreement from affiliates of Silver Lake Group, which owns a majority of the company’s convertible notes due in 2026. 

S&P Global Ratings has already dropped AMC’s credit rating and classed the company as being in default. The fundraising from Mudrick last week was deemed a so-called distressed exchange due to some of Mudrick’s existing debt being converted to equity as part of the deal.