AMC theaters raising $500 million in debt amid coronavirus closures
Struggling movie theater chain AMC Entertainment, whose movie houses got shuttered nationwide last month by the coronavirus, said late Thursday it will raise $500 million in debt to stay afloat.
The largest cinema chain in the US has been the subject of bankruptcy rumors since it shuttered 630 theaters nationwide amid coronavirus restrictions in mid-March. The company also furloughed about 25,000 workers, including its Chief Executive Officer Adam Aron, who hoped to reopen theaters by mid-June.
“We cannot predict when or if our business will return to normal levels,” the company said in a Friday statement. “While we plan to eliminate variable costs and reduce fixed costs to the extent possible, we continue to incur significant cash outflows, including interest payments, taxes, critical maintenance capital expenditures, and certain compensation and benefits payments.”
AMC said the $500 million in first-line notes, a private offering that is exempt from the registration requirements of the Securities Act of 1933, will be due in 2025.
Shares of AMC Entertainment Holdings jumped 50 percent Friday to $3.66 in premarket trading.
Last week, The Post exclusively reported that the theater chain was in talks to hire law firm Weil Gotshal & Manges to explore a potential Chapter 11 filing.
AMC said Friday it believes it has enough cash to withstand a global suspension of operations until a partial reopening in July. At the end of March, AMC had a cash balance of $299.8 million, including borrowings in March 2020 of $215 million — the full availability net of letters of credit — under its $225 million senior secured revolving credit facility due in April 2024.
“We cannot assure you that our assumptions used to estimate our liquidity requirements will be correct because we have never previously experienced a complete cessation of our operations, and as a consequence, our ability to be predictive is uncertain,” the company said.
Even before coronavirus restrictions shut down its business, CEO Aron said that he and other top executives had agreed to cut their salaries and bonuses for three years, during a fourth-quarter call in later February. AMC is carrying about $5 billion in debt at the end of 2019 and losses of $149 million. That was after recording a $110 million profit in 2018.
AMC said it also will rely on the $2 trillion CARES Act for relief, and that it expects to receive roughly $19 million in cash tax refunds from overpayments and refundable alternative minimum tax credits, as well as some other tax and social security benefits.
Although AMC believes the hard-hit movie theater industry will “ultimately rebound” it remained wary that there will be after effects of the pandemic once the country reopens. Analysts have pointed to a post-quarantine China, where movie theaters offer limited seating and temperature checks before the show begins.
“Our business also could be significantly affected should the disruptions caused by COVID-19 lead to changes in consumer behavior, such as social distancing,” AMC said. “COVID-19 also makes it more challenging for management to estimate the future performance of our businesses or our liquidity needs, particularly over the near to medium term.”
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