AMC Entertainment Says Cash Will Be “Largely Depleted” By Year End; Exploring Assets Sales, Joint Ventures, Minority Investments

AMC Entertainment
AP

Things are going from bad to worse in exhibition as AMC Entertainment said Tuesday its cash will be gone by late this year or early next and it’s exploring potential sources of additional liquidity, including asset sales, joint ventures or minority investments.

The nation’s largest movie chain, like others in the industry, has been struggling to make ends meet after being shuttered for months due to COVID followed by a rocky restart. The chain has reopened internationally and in most U.S. states although key markets like New York and Los Angeles remain closed. Chains have pointed to New York as particularly problematic. Theaters have been shuttered across the state since mid-March with no guidelines for reopening or ballpark timeframe of when it may happen.

Studios have shifted major releases, making it harder to attract audiences. Most recently Disney moved Soul from its late November release date to run it on streaming service Disney+. As theaters struggle in a Catch-22, COVID spiral, the entire landscape is shifting. Disney was also the latest major media conglomerate to yesterday announce a major streamlining and reorganization of its business operation to put streaming front and center.

In an SEC filing, the company said it “believes its cash burn to date is in line with the Prior Update. However, given the reduced movie slate for the fourth quarter, in the absence of significant increases in attendance from current levels or incremental sources of liquidity, at the existing cash burn rate, the Company anticipates that existing cash resources would be largely depleted by the end of 2020 or early 2021. Thereafter, to meet its obligations as they become due, the Company will require additional sources of liquidity or increases in attendance levels. The required amounts of additional liquidity are expected to be material.”

AMC said its cash burn — how much it goes through each month — is impacted by, among other things, “the timing of resumption of theatre operations, including with respect to some of our most productive theatres which remain closed, the timing of movie releases and the slate of future releases, theatre attendance levels, landlord negotiations and minimum lease payments, costs associated with the AMC Safe and Clean initiative, and food and beverage receipts.”

AMC has raised close to $40 million to date by selling shares. In a major debt restructuring announced over the summer, it brought in several hundred million dollars in cash, reduced interest payments and extended maturities on loans. But AMC and other exhibitors figured they’d be back on their feet sooner than appears to be the case. Reopening theaters, as the chain has been doing, costs more than keeping them closed but either way the situation has become dire. The SEC filing described a situation that is completely up in the air due to the unknown magnitude and duration of the pandemic.

Regal Cinema’s UK-parent Cineworld several weeks ago said it was closing its U.S. and U.K. locations. The other big chains did not follow.

AMC said it’s also looking at additional debt and equity financing and further renegotiations with landlords regarding its lease payments. It stopped short of saying it was considering an outright sale but said it would consider joint-venture or other arrangements with existing business partners. AMC is majority owned by Chinese conglomerate Wanda. Investment firm Silver Lake is also an investor.

But, AMC said, “there is a significant risk that these potential sources of liquidity will not be realized or that they will be insufficient to generate the material amounts of additional liquidity that would be required until the company is able to achieve more normalized levels of operating revenues.”

Cash burn is, said, is “impacted by, among other things, the timing of resumption of theatre operations, including with respect to some of our most productive theatres which remain closed, the timing of movie releases and the slate of future releases, theatre attendance levels, landlord negotiations and minimum lease payments, costs associated with the AMC Safe and Clean initiative, and food and beverage receipts.”

This article was printed from https://deadline.com/2020/10/amc-entertainment-could-be-largely-depleted-by-year-end-exploring-assets-sales-joint-ventures-1234596325/