AMC Raises $917 Million on the Promise That Theaters Will Return
(Bloomberg) -- AMC Entertainment Holdings Inc., the world’s largest movie-theater chain, has found a winning message with deep-pocketed investors: Cinemas will recover once the pandemic is over.
For about a year, the chain has battled creditors who repeatedly urged the company to file for bankruptcy in the face of a devastating global pandemic that halted moviegoing. AMC said Monday that it has raised $917 million, enough for at least the next six months. It did so by reminding “doubters” that the industry has survived existential threats before, Chief Executive Officer Adam Aron said in an interview.
“Remember people have been forecasting the end of the movie-theater business for decades,” Aron said, listing the challenges posed by videocassette recorders, DVD players, on-demand rentals and now streaming. “Movie theaters have proven to be a very resilient activity with great consumer appeal, and we expect that will continue.”
Theaters have been decimated by the pandemic, with health officials forcing them to close and Hollywood studios delaying almost all of the potential blockbuster movies that cinemas need to recover. Streaming services like Netflix Inc., investing heavily in movies, have made it easier than ever to skip the theater and see new films at home.
Even before Covid-19, moviegoing in the U.S. was on the decline, and AMC was heavily indebted. Theaters in the chain’s two largest markets, New York City and Los Angeles, have been dark for nearly a year. Studios have used the crisis to secure new agreements that let them sell their films online within days or weeks after they come out in theaters. Warner Bros., one of the largest studios, unilaterally decided to premiere all its 2021 films on its streaming service HBO Max and in cinemas simultaneously.
Shares of AMC, based in Leawood, Kansas, rose as much as 39% to $4.88 in New York, their highest since late November. The stock traded at historic lows for much of 2020 as the Covid-19 crisis engulfed the company. Management started issuing “going concern” notices in June, warning the company risked running out of cash. The process of raising funds to survive bankruptcy has been so difficult that Aron last year compared it to the British fighting off the Nazis in World War II.
Aron said his team relied on “financial engineering” to keep the chain afloat -- Monday’s agreement included a $547 million loan backed by the company’s theaters in Europe. Conversations with creditors reached a turning point in late 2020, when Covid-19 vaccines were approved and distribution commenced, he said.
“As more and more people get vaccinated, the course of activity will be much more normal going forward,” he said.
As the pandemic lets up, studios will still rely on exhibitors to debut movie franchises in a major way, Aron said, adding AMC expects to operate roughly the same number of theaters with the same number of workers as before. Cinemas have always innovated to keep up with the times, he said.
“Radio was going to kill movie theaters. Television was going to kill movie theaters. VCRs were going to kill movie theaters,” he said. “Once we’re through the pandemic, we will figure out ways to adjust our business activity to co-exist successfully and peacefully with streaming.”
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