Reading into the details of the recent refinancing agreements for AMC Theatres, (the documents are available to view via the SEC) we have a few more details. AMC Theatres which owns the subsidiary Odeon Cinemas with 120 cinemas and over 950 screens across the UK has placed the Odeon Cinemas Chain up as collateral.
Odeon previously used an existing revolving credit facility of £100m which has now been refinanced, along with an extra £300m in additional liquidity from the agreement. 3 weeks ago we reported this was a potential avenue, moreover, after reporting the refinancing detail a few days ago, we’ve managed to dig deeper to confirm the details.
The deal has been secured via assets across Europe, not just affecting the UK’s Odeon sites, but also cinemas across Europe under the Nordic Cinema Group and UCI Cinema subsidiaries. The additional loan, reports Bloomberg, comes from Oaktree Capital Management and Centrebridge Partners.
The companies are known within the industry for providing funds for troubled companies and according to the source, were wishing to remain private in the matter.
AMC Theatres’ Rental Bill Keeps Climbing
Further reading in the filing shows the company indicating they expect rental cash costs to increase significantly as many of the rent obligations. Obligations have been mostly deferred for 12 months due to the pandemic shuttering cinemas across the company.
The document also notes while negotiations continue to take place, many sites are under default with landlords and could be subject to lease termination or insolvency proceedings. If the company can’t come to an agreement on these rents and only further defer payments, the cash flow situation will become a lot more difficult.
More cash will be needed to meet these agreements, for a company struggling with liquidity as it is, this could be devastating.
Challenge to our long-term viability if income doesn’t return
With higher refinancing interest rates and increasing debts, it is noted that should the company’s operating cinemas fail to return to “pre-COVID levels”, it will challenge “our long-term viability”. Furthermore, even if the levels returned to the company, AMC Theatres and its subsidiaries still need to look at financing options and debt management in order to reduce just how leveraged by creditors as it currently stands.
Interestingly the company confirms that they will continue to explore other avenues such as Joint-Venture or Equity investments. Could we see an Odeon takeover?
What Does It Mean?
As we reported earlier in the week, the $900m+ package for AMC Theatres solidifies its future until at least July if the CEO, Adam Aron is to be believed. However, before then they could face further defaults or insolvency action over their owed debts and rental agreements across the globe from creditors and landlords.
European Cinemas Probably Shut Till Easter
Certainly, in Europe, Germany has recently announced a 4-stage reopening plan which lists Cinemas at the back end of the plan frustrating Cinema operators. The UK recently has begun discussions over opening up areas locked down in the current national lockdown programme.
Speaking with operators, they aren’t expecting to begin until at least Easter, which would be a few weeks before Walt Disney Pictures is set to release Black Widow in May. With distancing measures expected to be in place throughout the year still, this still provides problems for AMC Theatres & Odeon.
Whilst the film slate is full of potential hits, revenue will undoubtedly still be down on pre-COVID income. Even with the vaccine roll-out, will the confidence still be there for people to return? Many cinemas were struggling to stay afloat under the current measures before the end of 2020.
From independents to Vue, Cineworld, Odeon, Showcase, and Empire everyone will be battling for audiences across the UK. So, whilst the future is secured for AMC Theatres and Odeon Cinemas in Europe until the summer, it’s still very much under intense pressure to survive in the current form.
What do you make of the news? Will levels return to pre-Covid level in 2021 or is that a year away? Let us know in the comments below.
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