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Cash-strapped exhibitor AMC Entertainment on Thursday said it will raise $500 million in new debt to bolster its balance sheet liquidity.
“AMC intends to use the net proceeds from this offering for general corporate purposes, including further increasing AMC’s liquidity,” the cinema chain said in a statement about the senior notes due in 2025 to be offered via a private offering.
AMC said in a supplemental disclosure that it is generating no revenue while its U.S. theaters are shut down. As of March 31, the chain said it had $299.8 million in cash on hand, including borrowings of $215.0 million drawn from a revolving line of credit facility, and another 89.2 million pounds ($111.4 million) tapped from another revolving credit facility for Odeon Cinemas in the U.K.
“Due to significant actions taken by the company, we believe our current cash balance is sufficient to withstand a global suspension of operations until a partial reopening in July. After giving effect to the proposed notes offering, we believe the company will have sufficient liquidity to withstand a global suspension of operations until a partial reopening ahead of Thanksgiving,” AMC added.
At the same time, AMC, in a separate April 17 SEC filing, revealed its business survival amid the current theater closures could hinge on being able to secure additional incremental financing from its lenders or the federal government’s stimulus package in response to the COVID-19 crisis to avoid breaching its debt covenants.
In the SEC filing, AMC disclosed it requires waivers from its revolver lenders to avoid breaching its 6x secured leverage ratios under debt covenants when tested beyond March 31, 2020. And securing those waivers would be required to complete its $500 million senior notes offering.
“The closing of the notes offering will be conditioned on receiving these waivers. However, we can make no assurances in this regard and a failure to obtain these waivers could result in a default under these facilities,” AMC wrote.
With Wall Street judging a Chapter 11 bankruptcy filing for AMC Theatres increasingly likely, shares in AMC Entertainment have been tumbling as the company, in which Chinese conglomerate Dalian Wanda Group owns a majority voting stake, has been looking for various ways to reduce costs. That includes furloughing all of its 600 corporate employees, including CEO Adam Aron, in late March following the closure of all its cinemas.
AMC Theatres’ debt woes have only been compounded by around $250 million paid in rent each financial quarter to landlords to operate its multiplexes. The firm’s shares have lost 70 percent of their value this year, and much of its $4.9 billion debt is trading at distressed levels of about 30 cents on the dollar.
The exhibition giant on Thursday said it had little visibility to predict when its cinema chain can enjoy a significant rebound. And it noted that some studios were breaking the traditional theatrical window with releases.
“Some movie studios have also reduced or eliminated the theatrical exclusive release window as theaters are not operating,” AMC stated in its disclosure. “The longer and more severe the pandemic, including repeat or cyclical outbreaks beyond the one we are currently experiencing, the more severe the adverse effects will be on our business, results of operations, liquidity, cash flows, financial condition, access to credit markets and ability to service our existing and future indebtedness.”
At the same time, the company’s stock got a lift when White House guidelines released Thursday recommended that movie theaters be allowed to reopen once the coronavirus pandemic begins to recede, albeit with social distancing protocols.
Shares in AMC Entertainment jumped in after-hours trading by 89 cents, or nearly 37 percent, to $3.33. Rival Cinemark Holdings saw its shares rise by just over 13 percent, or $1.54, to $13.15 in after-hours trading, while Imax got an after-hours bump in its stock price of $1.27, or 12.5 percent, to $11.39.
Added AMC on Thursday, “We cannot predict when or if our business will return to normal levels.”
April 17, 6:30 a.m. Updated with additional details on AMC’s debt covenants contained in an April 17 SEC filing.
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