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AMC movie theaters seek liquidity lifelines to avert bankruptcy

Katherine Doherty
Bloomberg

AMC Entertainment Holdings Inc. needs to raise at least $750 million to stay open and might go bankrupt if the effort doesn’t succeed.

The world’s largest movie-theater chain said in a filing Friday that without new financing, existing cash will be depleted as soon as next month. To remain viable through 2021, AMC is looking at selling more shares, financing from European sources and deals with debt holders including Mudrick Capital Management, the distressed-debt investment firm.

Stockholders probably will be wiped out if it winds up in bankruptcy, AMC said. 

In this May 13, 2020 file photo, AMC Empire 25 theatre appears on 42nd Street in New York.

AMC has eight theaters in southeast Michigan, and 14 statewide.

Theater chains have been hard hit during the Covid-19 pandemic by government-mandated shutdowns, and then by the reluctance of moviegoers to risk attending. The problem has been compounded by movie studios delaying major releases that would attract more customers.

Scarce Attendance

Attendance at AMC’s U.S. locations fell 92% in the fourth quarter from the same period a year ago. The company has limited capacity and hours, and chose to close some of its U.S. theaters. In large markets such as New York City and Los Angeles, cinema chains have been unable to reopen any locations.

AMC is negotiating rent breaks with its landlords, before more than $400 million of deferred rent comes due next year, and said it must reach an agreement to ease a “substantial portion” to avoid bankruptcy.

Cash stood at around $320 million as of last month, down from $418 million in September, according to the filing. Excluding recent equity offerings, AMC’s average monthly cash burn was about $125 million during October and November.

AMC signed a commitment letter with Mudrick Capital that calls for the investment firm to buy $100 million of new 15% / 17% first-lien secured pay-in-kind toggle bonds due 2026 issued by AMC. In exchange, Mudrick would receive a commitment fee equal to than 8 million AMC shares. The deal also calls for exchanging $100 million of AMC 10% / 12% second-lien subordinated secured PIK toggle bonds due 2026 currently held by Mudrick for about 13.7 million shares.

Lender Talks

The theater chain said it exchanged term sheets and held due diligence discussions with other parties, and it expects talks will “intensify” in the coming weeks. The talks include new-money financing and converting second-lien debt to equity, which would help reduce AMC’s leverage but dilute current shareholders, the company said.

First-lien lenders also have expressed interest in providing a bankruptcy loan, the company said. That debt would rank senior in the event of a court filing. It’s seeking an agreement with creditors under its first-lien facility to extend a waiver.

AMC’s continued liquidity troubles come with few signs emerging that cinema attendance will recover soon. Despite enthusiasm about vaccines rolling out, it will take until well into the second quarter of 2021 for a critical mass of moviegoers to be inoculated – and they might still be skittish about filling theaters.

Moves by Hollywood production studios augur poorly as well. AT&T Inc.’s Warner Bros. shocked the industry last week when it said all 17 of its planned major releases in 2021 will debut simultaneously on the company’s HBO Max streaming platform and in theaters. AMC responded that it would urgently talk with WarnerMedia about “economic terms that preserve our business.”