AMC Theater Chain Turns Focus to Surviving Until Next Summer

(Bloomberg) -- AMC Entertainment Holdings Inc.’s executives are focused on raising enough capital to keep the struggling theater chain afloat until summer, when they believe a Covid-19 vaccine and a backlog of blockbuster films will reverse its fortunes.

The world’s largest cinema chain said Monday it has enough cash to last until early 2021, assuming attendance remains at its current, modest level. Chief Executive Officer Adam Aron said he’s talking with more than a dozen strategic investors about potential equity investments, as well as current lenders to shore up its liquidity until summer.

“It all really comes down to one thing: We believe that we will need to raise more capital,” Aron said on a call with analysts after reporting a third-quarter loss of $905.8 million, or $8.41 a share.

AMC is still in the midst of perhaps the most grueling year in its centurylong history. The company closed its entire domestic theater circuit in March as the pandemic spread across the U.S., and has reopened under difficult circumstances. There are few new films to draw in audiences to the auditoriums, and the theaters that are open must cap ticket sales to adhere to social-distancing rules.

The Leawood, Kansas-based company said Monday its revenue tumbled to $119.5 million in the third quarter, plunging from almost $1.32 billion a year ago. While it has reopened 540 of its 600 locations in the U.S., they’re typically no more than 20% full and operating only on the weekends to save money.

Over the course of the year, analysts have predicted the company would soon be headed for bankruptcy court, but Aron has managed to raise new funds. On Monday’s call, he compared himself repeatedly to Winston Churchill, recalling the late British prime minister’s speech vowing to fight the Nazis on all fronts.

Raising Funds

Since March, the company has raised about $900 million from new debt and equity, secured more than $1 billion of concessions from creditors and landlords, and raised more than $80 million from asset sales. The company said earlier Monday that it’s seeking to sell about $48 million in new stock after previously warning it could run out of cash by the end of the year.

AMC still faces more obstacles. Based on current attendance and agreements with landlords, AMC projects its cash burn will increase going into the fourth quarter, rising to more than $100 million a month. Additionally, some of the 261 of its 358 international locations that had previously reopened will have to close again, as the virus spread worsens in Europe. The company reported $418 million in cash at the end of September.

“We want much more than that, we need much more than that,” Aron said on the call.

AMC, which is controlled by billionaire Wang Jianlin’s Dalian Wanda Group Co., may not need quite as much cash if studios start releasing new films. The next big potential blockbuster isn’t scheduled until Christmas Day, when Warner Bros.’s “Wonder Woman 1984” is set to hit cinemas. Aron said he believed the studio was trying its hardest to stick to that date.

Fun Postponed

Altogether he calculated that 44 movies scheduled to come out in 2020 were deferred until 2021 or later, suggesting a windfall for the theaters that can survive the pandemic. When pressed on whether traditional, cinematic releases will resume after the pandemic, given that studios have used the time to experiment with more streaming releases, Aron said the company can benefit from online viewing, too.

AMC struck a unique agreement with Universal Pictures, in which the studio’s films can be sold online for $20 a mere 17 days after premiering in AMC’s cinemas. Normally, the titles show exclusively in theaters for up to three months, and Universal offered AMC a cut of online sales in exchange for compressing that window.

Six Universal films will be released using that model before the end of 2020, Aron said, adding that it has already paid off. The studio quickly put “Kajillionaire” in front of online audiences after it debuted in cinemas in September, and AMC made more money off the new hybrid model than it would have if the film had stayed in theaters for the full three months.

Shares of AMC were rose about 3% in extended trading. The stock fell 8.9% to $2.15 at the close in New York and is down more than 70% this year. Meanwhile, AMC’s term loan and bonds hit new lows on Monday. Its 10.5% bonds due 2025 and 2026 fell to around 54 cents on the dollar before the quarterly results, according to Trace bond trading data. Its 12% notes due 2026 slid to as little as 5 cents on the dollar.

©2020 Bloomberg L.P.