MoviePass Runs Low on Cash, Gets Loan to Restore Service

(Bloomberg) -- The parent company of MoviePass got a hastily arranged short-term loan to resume operating after failing to pay key business partners and customers were barred from theaters Thursday and Friday.

Helios and Matheson Analytics Inc. will use $5 million of the approximately $6 million loan from Hudson Bay to pay its processors, the company said in a regulatory filing Friday. Service went down Thursday after the processors stopped clearing payments for MoviePass, which said more hiccups could hurt the company’s ability to retain its subscribers. The company said in a tweet Friday afternoon in New York that service had been restored.

Terms of the loan are onerous. Investment firm Hudson Bay Capital Management can demand repayment of more than $3 million of the loan on Aug. 1, and the rest on Aug. 5. Proceeds from a planned stock sale must also be used to repay the debt.

If Helios and Matheson Analytics fails to pay, it will be subject to a 15 percent annualized late fee until it makes good on the obligation. If the company is 48 hours late in its payment, Hudson Bay can require the company to repay the debt at 130 percent.

Competing Services

The company, which lets subscribers pay $9.95 per month to watch a movie every day in the theater, is up against growing competition. AMC Entertainment Holdings Inc. and Alamo Drafthouse Cinema, two theater chains, have launched their own services to rival MoviePass. The venture has been an unprofitable cash-burner, but Chief Executive Officer Mitch Lowe is aiming to sign up more subscribers who don’t go to the movies quite so often to turn MoviePass into a money-maker.

Regardless of when Helios and Matheson Analytics repays the debt, it will also have to fund Hudson Bay’s legal fees and other expenses associated with extending and collecting the debt.

MoviePass said on Twitter Thursday that it was "investigating an issue that is preventing users from checking-in to movies." It said in a later tweet that the issue "is not with our card processor partners."

Shares of Helios and Matheson Analytics plunged 71 percent to $2 on Friday. A representative for the New York-based company didn’t provide comment. A spokeswoman for New York-based Hudson Bay declined to comment.

Lowe has compared MoviePass to Spotify Technology SA, Inc. and Netflix Inc., noting those companies all incurred heavy losses early in their existence.

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