As it continues to burn cash at an alarming rate, embattled movie theater operator AMC Entertainment has penned an agreement to receive $100 million on January 15, the firm said on Friday, but it still needs much more to make it through 2021.
AMC, the world’s largest movie theater chain with more than 1,000 locations, revealed in a regulatory filing on Friday that it will receive the cash thanks to a debt-financing agreement with New York City-based Mudrick Capital Management.
As part of the deal, Mudrick will convert $100 million of its existing AMC debt to about 13.7 million shares of the movie theater chain’s stock (currently valued at nearly $57 million), and the firm will also receive an additional 8.2 million shares (valued at $34 million on Friday) as a commitment fee for agreeing to loan AMC more cash.
AMC also warned that if it doesn’t raise more cash, it expects existing cash resources will be depleted next month.
“To remain viable through 2021,” AMC estimates it will need at least $750 million in additional funding to meet its current cash requirements, such as rent and interest payments, the firm said Friday.
In October and November, AMC was burning cash at an average rate of about $125 million per month, filings show.
While the broader market was nearly flat, AMC shares edged up 0.6% on Friday after the announcement, but they’re still down roughly 45% this year; meanwhile, the S&P 500 has climbed 13%.
92%. That’s how much attendance has declined at AMC’s U.S. movie theaters in the fourth quarter thus far, compared to the same period last year, the firm said on Friday.
As of November 30, AMC was operating 404 of its 594 U.S. movie theaters, though only with limited seating capacities and hours. Abroad, the firm was operating just 108 of its nearly 400 international theaters.
“The promise of an effective vaccine against the coronavirus” is expected “to have a material positive impact on our industry and [has] generated optimism that movie theater attendance levels ultimately will significantly rebound from current levels,” AMC said on Friday, but it also noted ongoing challenges including “a significant spike in coronavirus cases,” as well as delayed blockbuster releases and the release of titles on streaming platforms instead of on the big screen. The firm also warned that Warner Bros’ decision to move its entire studio film slate for 2021 to simultaneous release “may result in other studios adopting a similar strategy.”
Movie theater chains have been reeling since March, when states began to force the closure of nonessential indoor businesses in an effort to curb the spread of coronavirus. Both AMC and Regal started opening up U.S. locations in August, but sustained closures in states like New York have kept the movie theater industry scrambling for cash. “This has been the most challenging quarter in the 100-year history of AMC,” said AMC CEO Adam Aron in an August statement. AMC has noted only two possibilities that can keep its business afloat: significant increases in attendance (which is highly unlikely in the nearterm) or other liquidity injections—most likely from additional debt and equity financing, but also through potential asset sales and further renegotiations of lease terms. Even then, however, the firm says there’s “significant risk” it won’t be able to tap more cash.
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