A year ago, publicly-traded AMC Theatres (NYSE:AMC) was worth more than $1.7 billion. Then the coronavirus crisis happened and the largest movie theater chain in the U.S. saw its market value fall to $200 million at one point in April.
The Kansas-based chain shut its 630 U.S. theaters on March 17 to slow the spread of the virus and furloughed 25,000 workers. The company has more than 1,000 venues worldwide.
Facing uncertainty about when people will feel safe going back to the movies or when theaters will re-open, the future looked murky for AMC.
AMC was in talks to hire law firm Weil Gotshal & Manges to explore a potential Chapter 11 filing, and bankruptcy looked increasingly likely as the company stopped paying rent across its locations, a source told the New York Post.
However, now the theater operator has announced plans to raise $500 million in debt that it says will help it to survive well into the fall, Motley Fool reported. Owners are hopeful movie theaters will re-open in July and the threat of bankruptcy for AMC seems to have been pushed to the background.
AMC’s cash reserves were dwindling even before the outbreak of the virus, Variety reported. The company was in debt to the tune of $4.9 billion, having used other people’s money to refurbish existing locations and buy competitors Carmike and Odeon Cinemas.
AMC’s majority shareholder is Chinese conglomerate Dalian Wanda Group and also owns UCI — Europe’s biggest cinema operator.
AMC informed landlords in March that it would not be paying rent because all its theaters are closed due to the coronavirus outbreak.
The owners of a shopping mall in Hialeah, Florida, have sued AMC for failing to pay the April rent.
In Variety‘s reader comments section, a reader posted, “AMC = Deadbeats. Pay your rent! You have a billionaire Chinese owner. No excuses.”
The company is seeking a $500 million lifeline in the form of first-lien notes — a private debt offering that would help it stay afloat at least until Thanksgiving, Business Insider reported.
In a financial filing with the Securities and Exchange Commission, AMC said that it thinks the $500 million in additional liquidity will help it survive until a partial reopening in November.
Before the coronavirus crisis set in, AMC was attempting a turnaround and building out a subscription business. At the end of March, AMC had $300 million in cash, according to the financial filing.
Experts say the $500 million won’t be enough if theaters stay empty through the fall. “If they don’t reopen and start generating profits by November, they have a real risk of being forced into bankruptcy,” Michael Pachter, an equity analyst who covers AMC for Wedbush Securities, told Business Insider via email. “This debt bridges their cash needs till then, but it’s anyone’s guess if we’ll be even close to ‘normal’ by year-end.”
The pandemic has turned the movie industry upside down, “at least, temporarily,” CNN reported. The rise of streaming and video-on-demand has resulted in conflict between theaters and film studios over what is known as the “theatrical window” — the length of time that a movie plays in theaters before it is offered on other platforms.
AMC said it will no longer screen films made by Universal Pictures after Universal bypassed theaters — closed due to coronavirus — and instead launched “Trolls World Tour” on-demand. That move appears to have paid off for Universal, which earned almost $95 million in rental fees since the film’s digital release April 10.
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The movie theater industry can’t afford the fight that AMC picked with Universal, Motley Fool reported. AMC’s refusal to show Universal’s films is going to hurt AMC more than it’s going to hurt Universal. The six biggest studios, which include Universal, Walt Disney, AT&T’s WarnerMedia, are making more money and fewer films thanks to the many ways to monetize content outside of theaters. Netflix is just one of them.
The movie circuit has accumulated considerable debt, and theaters aren’t able to bring in any revenue for the foreseeable future, according to Variety.
“AMC was highly leveraged before this happened,” said Brian L. Davidoff, chair of law firm Greenberg Glusker’s bankruptcy, reorganization and capital recovery practice. “They’re going to have to find a way to shed some debt.”
