AMC Theaters pulled themselves back from the edge of bankruptcy this week, getting a much-needed cash infusion right at the last second.
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Theaters might not be dead quite yet. After a terrible year for box office sales and movie closures because of pandemic-related issues, it looked like the world of movie theaters as we knew them was all but over. But don’t count these folks out quite yet. AMC Theaters announced this week that they might have given themselves just enough of a runway to keep things going for another year or two. It’s an effort to keep their financial heads above water until things return to “normal”. Whether it ultimately pays off remains to be seen, but for now, you aren’t going to see AMC theaters boarded up for good.
The lifeline for AMC Theaters came through a number of different instruments that helped infuse much-needed cast into their company. The first step was offering 165 million new common shares of their stock, AMC Entertainment Holdings, Inc. This amounted to a cash value in the form of debt liens of over $500 million dollars. They then issued another 22 million shares and converted that to second-lien debt which helped gain another $100 million. Essentially, this debt stands second in line in the event of foreclosure on the company, but was able to give them more cash on hand for the short-term.
When it was all said and done, and they’d also apparently sold off a few assets, AMC Theaters had put a little under a billion ($917 million) dollars back in their coffers. For a company on the brink of bankruptcy, this is likely nothing short of a financial miracle considering the state of the industry and the uncertainty around theaters being viable movie options going forward. If nothing else, they at least gave themselves time to find out.
The movie industry has taken a catastrophic blow over the last year with pandemic-related closings all but shuttering the business for good. In the wake of the pandemic, folks were either more inclined or just flat out instructed to stay at home, rendering the typical movie theater obsolete almost overnight.
But it’s worth noting that while the pandemic might have been the death knell for theaters, the trend line was headed in the completely wrong direction for years. The numbers had been trending downwards for decades. 1.58 billion tickets were sold in 2002 but in 2019 (the good old days) that number had fallen to 1.23 billion. And then 2020 hit, with the final tally sitting in around 220 million tickets sold.
AMC, only a month or so ago, was sitting on the edge of bankruptcy. They issued an SEC filing that said without help they’d be out of cash by January 2021. So to say this came at the very last second isn’t hyperbole. Without this latest cash round there likely would have been no more AMC Theaters to speak of.
Whether this short term debt cycle for AMC Theaters saves them over the long term remains to be seen. With more and more movies heading straight to streaming timed with a theater run it stands to reason the number just never really pick back up. But AMC has given themselves a chance to at least find out if there’s ever an appetite to head back to the movie theaters in big numbers again.