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Cineplex has reached another agreement with key lenders for relief on its financial covenants to the fourth quarter of 2021.
The latest change to its credit agreement comes as Cineplex swung to a fourth quarter loss after the Canadian movie theater chain saw its box office revenues plummet amid widespread pandemic closures for its theatrical screens. Cineplex posted a loss of CAN$230.4 million (US$181 million), against a profit of CAN$3.5 million in 2019, on overall revenue falling 88 percent to CAN$52.5 million (US$41.4 million.
Box office revenues fell CAN$174.5 million (US$137.6 million), or 96 percent, to CAN$7.3 million (US$5.7 million) during the fourth quarter, as theater attendance tumbled 95.3 percent due to mandatory lockdown measures in most Canadian provinces, and reduced seating capacity for theaters allowed to remain open.
But while Cineplex like its U.S. cinema chain peers was impacted as Hollywood studios delay their megabudget tentpoles to later in 2021 and beyond for a big-screen release, the Canadian company did benefit from the popularity of higher-priced home entertainment fare hitting the market amid the pandemic.
Cineplex during the latest quarter saw benefits from premium video on demand releases of Wonder Woman 1984 and The Croods: A New Age via its Cineplex Store online movie rental platform. The third largest major movie chain in North America has effectively walked a tightrope after it endorsed Universal’s new PVOD window to chart a new future amid the COVID-19 crisis.
“We’re trying to balance the two, until we see the other side,” Cineplex CEO Ellis Jacob told analysts during a morning call as his company looks to secure revenues from the PVOD window and theatrical box office, where possible, during the pandemic.
At the same time, Jacob reiterated that his conversations with the major studios reveals a long term commitment to the theatrical box office window, even as the COVID-19 crisis upturns that traditional business model in favor of increasing online and streaming play for tentpoles.
The Canadian exhibitor is betting the promise of North America’s vaccine rollout this year will offer a pandemic cure to help bring customers back to the multiplex. As support, Cineplex has offered its shuttered multiplexes to federal and provincial governments to use as immunization centers countrywide.
Until it receives a greenlight to reopen, Cineplex continues to shore up its balance sheet liquidity to survive the pandemic closures. On Thursday, the company pointed to securing CAN$60 million (US$47.2 million) from the reorganization of its SCENE loyalty program and another CAN$57 million (US$45 million) from the sale-and-leaseback of its head office in Toronto, which closed in early January.
And on Feb. 8, Cineplex secured a waiver for a third time from certain financial covenants under its credit facilities with key lenders. In return for that financial breathing space, Cineplex will raise at least CAN$200 million (US$158 million) in fresh cash with the offer of new secured notes via a private placement.
Jacob told The Hollywood Reporter that his company has continued to cut costs and negotiate with its multiplex landlords to create a leaner, more resilient theater chain with enough liquidity to see it through the pandemic.
“We’re working hard to minimize the cash burn during the first quarter of 2021. It’s going to vary depending on when we reopen and what the product flow is going to be when we reopen,” he argued. Jacob also pointed to Asian markets like Japan and China that have seen cinemas reopen and where pent-up demand for movie-going has led to new box office records for theatrical releases.
Jacob added a possible reopening of movie theaters in key U.S. markets like California and New York bode well for the arrival of more Hollywood tentpoles on Cineplex screens. “There would be a huge backlog for Cineplex moving into the future, and that will provide us with a great startup as we ramp up in different provinces,” he said.
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