I ran across this article and found it to be an IMAX view of another example of how Covid is altering parts of our day to day lives. It’s interesting in that we may be seeing the beginning of the end when it comes to a ‘night out at the movies’. Several studios are now releasing new productions directly online either simultaneously, or instead of, premiering and showing them at a traditional brick and mortar movie theatre. Is the movie theatre dead? Let’s hope not.
AMC Theatres Warns Money Could Run Out Next Month Amid New Pandemic Closings
Latest Financing for Largest Cinema Chain Comes After Rent Abatements from Landlords
AMC Theatres, the nation’s largest cinema chain, is warning it could run out of cash as early as next month and that moves by major studios including Warner Bros. to release blockbusters directly onto streaming channels are worsening its financial challenges.
The company, which operates more than 550 U.S. cinema locations and 1,000 worldwide, said it needs at least $750 million to remain viable, even after obtaining $100 million in new debt financing, according to a federal regulatory filing.
“In the absence of additional liquidity, the company anticipates that existing cash resources will be depleted during January 2021,” officials of Leawood, Kansas-based AMC said in its latest filing with the Securities and Exchange Commission. It additionally noted “substantial doubt exists about the company’s ability to continue as a going concern for a reasonable period of time.”
Amid new theater closings nationwide spurred by recently spiking coronavirus infections, the situation faced by AMC and its rivals, including Regal Cinemas and Cinemark Theatres, also presents potential financing issues for commercial property landlords with theaters as tenants.
Researchers at Bank of America Securities recently reported that there are $31 billion in loans collateralized through commercial mortgage-backed securities involving properties with movie theaters among their five largest tenants. CoStar data shows that more than a third of that debt, $11 billion, is being carried by owners of properties with AMC Theatres as a tenant.
In its latest regulatory filing, AMC said its strain has been exacerbated by movie studio Warner Bros.’ recent decision to release all of its 2021 studio films to theaters simultaneously with their debut on Warner Media’s HBO Max streaming platform, “which may result in other studios adopting a similar strategy.”
During Walt Disney Co.’s investor day presentation Thursday, executives said the company is planning to have several of its studio films debut either exclusively on its Disney+ streaming platform or simultaneously with their theatre releases in the coming year.
Amid a plunge in revenue in the pandemic, AMC has previously announced financial restructuring moves that included deferring more than $400 million in rent obligations to 2021. The company said Friday it has completed a $100 million debt offering from investment firm Mudrick Capital Management.
AMC said in the filing that its cash expenditures for rent next year are scheduled to “increase significantly as a result of rent obligations that have been deferred to 2021 and future years that are in excess of $400 million as of November 30, 2020.”
“In light of our liquidity challenges, and in order to avoid bankruptcy, we believe the company must reach accommodations with its landlords to abate or defer a substantial portion of the company’s rent obligations,” reads the SEC filing.
It said it plans to enter additional landlord negotiations for reductions, abatement or deferrals of rent in an effort to “avoid bankruptcy.”
“Depending on the outcome of our negotiations and in the absence of satisfactory arrangements, we may cease to make rent payments, the result of which may permit landlords to threaten or seek potential remedies, including acceleration of obligations or involuntary insolvency proceedings,” the filing said. “Our ability to generate additional liquidity and our future viability will depend in large measure on successfully addressing our rent obligations.”
By Lou Hirsh
Dec 11, 2020