The chief executive of struggling cinema operator AMC Entertainment has said that imminent bankruptcy is “off the table” after securing close to $1bn across debt and equity markets over the past month.
AMC, which operates more than 1,000 cinemas worldwide, unveiled a new £400m lending facility on Monday, backed by the assets of its UK subsidiary Odeon Cinemas Group. The new loan expands an existing £100m 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 $100m 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 $917m since mid-December.
“Today, the sun is shining on AMC,” said Adam Aron, chief executive, adding that “any talk of an imminent bankruptcy . . . is completely off the table”.
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. 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 $124m 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 — 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.
“I just don’t see folks rushing back to the cinema. The pandemic accelerated a shift already under way from cinemas to streaming,” said John Dixon, a high-yield bond trader at Dinosaur Financial Group, adding that he streamed the movie News of the World starring Tom Hanks over the weekend.
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 latest James Bond film No Time To Die until October this year — the third time it has been postponed during the pandemic. The release is seen by many in the industry as a bellwether for the resumption of moviegoing. 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.
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.
Silver Lake did not immediately respond to a request for comment.
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.