AMC Theatres has been the theater chain struggling the most with the closure of movie theaters due to the coronavirus pandemic. The chain suffered a roughly $2.2 billion quarterly loss, and there has been doubt that the company would be able to survive, even if theaters were allowed to open this summer. Since that’s seeming less likely as COVID-19 cases are on the rise again in many parts of the United States, how will the chain survive? Apparently they’ve reached yet another new debt agreement that will keep them afloat through 2021.
Deadline has the details on this new AMC Theatres debt agreement. Here’s how it’s going to work:
“Under the deal, Silver Lake Group will purchase $100 million in first lien notes, adding to the $600 million in convertible bonds that it already holds in AMC. The company, which is the world’s largest theater chain, said in public filings that it will raise $200 million in cash by allowing debt-holders to swap their securities at a discount. As part of the deal, the interest they receive would be either 10% in cash or 12% in additional notes that would be due in 2026.”
That’s a lot of financial jargon, but the gist is that this new agreement will allow AMC Theatres to avoid being forced to close due to a lack of cash. In fact, this deal will apparently keep them solvent through 2021.
However, this feels like life support for the movie theater chain rather than a miracle solution. At the end of the day, AMC Theatres and the rest of the major chains in the United States need to reopen in order to start bringing in revenue. Though some theaters have opened around the United States, the box office numbers are dismal, especially since there aren’t any new movies to see. Surviving through 2021 is one thing, they still have to be able to earn money sooner than later.
The good news is that with this new debt agreement, hopefully they won’t be in a hasty rush to reopen while it’s still unsafe to do so. Just recently, the movie theater chains were teaming up to sue the state of New Jersey for not allowing them to open sooner. Plus, let’s not forget that they initially were planning on reopening without requiring customers to wear masks, and they only reversed their decision after public outcry.
As of now, the hope is for theaters to reopen in August with Tenet and Mulan leading the way, but we’re not going to hold our breath. Until people start wearing masks in public, we’re not going to see an adequate decrease in COVID-19 cases for a long time, and as long as that’s the case, the majority of theaters will remain closed.
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