“There is a significant risk that these potential sources of cash may not materialize or be insufficient to generate the significant amounts of additional cash that would be required until the company is able to achieve revenue levels. more standardized operating systems, ”AMC said. deposit said.
AMC Entertainment Says Cash Will Be “Worn Out” By Year End; Exploration of asset sales, joint ventures, minority investments
“I really don’t know how they don’t go bankrupt,” said a Wall Street analyst. “They should be short of cash at the end of January. And most businesses don’t file their returns when they’re minus ten million in cash. Lawyers must be paid. ”
At the close, AMC shares had plunged 13%. Cinemark, Marcus and National CineMedia fell 8%, 7.2% and 9% respectively. All had stabilized in trading after office hours.
AMC is in a tight turn, as he admitted. He has about $ 5 billion in debt and high debt means high interest charges. AMC, which is majority owned by Chinese conglomerate Wanda, racked it up before the pandemic with a series of acquisitions, dividend payments and upgrades to its theaters.
In contrast, Cinemark said it has around 17 months of cash flow and less than half of AMC’s debt. (One analyst attributed the decline in Cinemark shares in part to the fact that it was getting harder and harder to sell AMC shares. Short selling is all about borrowing shares, selling them, then buying them back to return. to the lender, betting the price will drop. Investors can bypass Cinemark as the only way to present short exposure.)
AMC noted in an SEC filing this morning that it raised nearly $ 40 million in a stock sale, which is good. But her cash consumption is around $ 115 million per month, and as of August 30, she had about $ 500 million in funds. The company said today that it plans to sell assets, joint ventures, the sale of minority investments and new rounds of stock or bond sales. It recently sold its Baltic theaters and, according to a source, was in talks to sell its Nordic cinemas.
Industry sources believe the first asset on the block in a bankruptcy auction would be AMC Classic, the former Carmike Cinemas acquired in 2016.
Meanwhile, said B Riley Securities analyst Eric Wold, asset sales may be possible, but it’s “a buyer’s market” – so prices would be low. “Given the unlikely ability to complete additional debt financings, we expect continued dilution due to additional share offerings and / or minority investments in the equity of the company.”
AMC restructured its debt in July by giving it a runway, but that can only last so long if filming doesn’t resume properly.
Wold called the absence from New York and Los Angeles truly crippling. AMC has opened more than 80% of its US theaters, but the lack of new cinematic content has resulted in an 85% drop in attendance to identical theaters, he said in a note this morning. And although only 17% of AMC’s national theaters have yet to reopen (some of which in North Carolina and Washington will be coming online soon), “the most productive theaters” in California and New York have. Still an uncertain reopening schedule. He said that the 17% of theaters that had yet to reopen had generated 23% of AMC’s national revenues in 2019. He “is not surprised to see studios continue to push the movie release schedule in. these circumstances. ”
“If things continue like this and there aren’t a lot of films and they stay open, they’ll be stressed,” said analyst Meghan Durkin of Credit Suisse. Debt restructuring “kicked the can for 12 to 18 months on some interest expense, but their rate of cash consumption is still more than double that of Cinemark.”
Regal parent Cineworld decided it was too expensive to stay open and said it was closing almost all of its US and UK theaters.
In a note from October 5, after the announcement that MGM had moved the next James Bond film No time to die from November to 2021, analyst Alan Gould of Loop Capital called it a “possible death knell for AMC.” Disney recently announced that Pixar Soul Would follow Mulan directly to Disney +.
Gould forecasts the domestic box office to fall 95% in the third quarter and 85% in the fourth quarter. He sees the domestic box office hitting $ 2.4 billion this year and $ 8.6 billion in 2021, up from $ 11.3 billion in 2019. He also expects the number screens shrink to around 36,000 over the next two years, from 41,000 currently.
COVID and the woes of the theater have accelerated the focus on streaming already underway before the pandemic. On Monday, Disney announced a rare restructuring of its content and distribution business units to maximize streaming potential, followed by similar moves from AT&T’s WarnerMedia and Comcast’s NBCUniversal.
One advantage is that closing Regal will benefit theaters that remain open. AMC CEO Adam Aron said a unique windowing deal with Universal would give it a head start with a handful of films, including Focus Features’ Kajillionaire, come play, and Let him go and Universal’s Croods: a new age.
In addition, Aron was able to find new money. AMC raised $ 500 million in debt offering at the start of the pandemic and $ 200 million in debt restructuring, which also reduced debt and interest charges and pushed back some repayment deadlines. Silver Lake, Partners invested $ 600 million in AMC in 2018, but it’s unclear whether the investment firm would bail them out or not.
Silver Lake was not immediately available for comment.
AMC declined to comment.
AMC rents 875 theaters (10.1k screens) and owns or partially owns 62 theaters (561 theaters) around the world. In the United States, AMC manages or owns a partial interest in seven theaters and 73 screens.
Bankruptcies are nothing new to the industry, and some experts believe lower screen counts in the United States would not be a problem given the changes in the entertainment landscape. Two decades ago, a handful of exhibitors went bankrupt and redeemed themselves after going into debt due to excessive construction. Between 1999 and 2001, bankruptcies included Regal, Carmike, Loews Cineplex, United Artists, General Cinema, Edwards Theaters, Mann Theaters, Dickinson Theaters and Silver Cinemas.
B Riley Wold is hanging on to a “neutral” rating on AMC, which he says “may be overly optimistic given our continuing liquidity issues.” But he added that he also believed that “if major US markets are yet to reopen given the short-term green light, the reaction to the company’s stock price and its ability to raise capital could be overwhelmingly positive. .
Anthony D’Alessandro contributed to this report.