Cineplex Gets Relief from Lenders as Revenue Falls 85% in 3Q

(Bloomberg) -- Cineplex Inc. reached an agreement with lenders for relief on its financial covenants to the second quarter of 2021 after the movie theater chain saw revenue plummet due to capacity restrictions in cinemas.

The Toronto-based company announced third quarter results that missed analysts’ expectations. Revenue declined 85%, to C$61 million ($46.4 million) from C$418.4 million a year ago. Analysts were looking for C$65.8 million.

Key Insights

• The company is trying to slow the rate at which it uses cash. It burned about C$16.6 million in cash per month in 3Q and has been burning C$15 million to C$20 million a month since the onset of the pandemic. It’s taking advantage of government programs to subsidize employee wages and is looking to sell its head office to raise money.
• The company had about C$460 million ($350 million) outstanding under its credit facilities as of Sept. 30, according to a statement.
• Cineplex gradually reopened theaters over the summer at limited capacity, but had to temporarily shut them again in parts of Canada in October after a second wave of Covid-19 hit. Attendance at theaters fell 91%. in the third quarter.
  • It will not reopen its locations in Toronto, Ottawa and Peel region anytime soon even if restrictions are relaxed due to concerns “from a financial perspective,” spokesperson Sarah Van Lange said earlier.
• Like other chains, Cineplex is being hurt by the delay of several big budget films. Last month, Metro-Goldwyn-Mayer pushed back the release of the James Bond flick ‘No Time To Die’ to April, sending shares down to a record low.
  • Bloomberg previously reported that the last big film of 2020, ‘Wonder Woman 1984,’ might stream on HBO MAX only a week or two after a theatrical release. “We haven’t discussed that with our studio partners,” Chief Executive Officer Ellis Jacob said in an interview Friday. “I’m not aware of them moving in that direction.”
• Cineplex soared 32% Monday after Pfizer Inc. said that its vaccine, developed with BioNTech SE, protects most people from Covid-19. The stock is down 81% this year and was removed from the S&P/TSX Composite Index on Sept. 21.
• “By early in the second quarter of 2021, business is going to change dramatically, and that’s going to be on the positive side because there’s a whole host of great movies ready to be released,” Jacob said. “We’ll be heading in the right direction.”

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