AMC Theatres Plans to Raise $500 Million in Private Debt Offering

Cinema chain is confident its cash balance is sufficient to withstand a global suspension of operations until a partial reopening in July

Last Updated: April 16, 2020 @ 6:24 PM

AMC Theatres intends to raise $500 million in a new debt offering, the company said on Thursday.

The cinema chain said it plans to use the funds for general corporate purposes, including improving liquidity. AMC has been hit hard by the novel coronavirus pandemic, which has forced the exhibitor to shutter its theaters nationwide and furlough its corporate staff, including CEO Adam Aron.

The aggregate $500 million worth of first-line notes will be due 2025. The private offering is exempt from the registration requirements of the Securities Act of 1933.

Shares of AMC stock were up more than 37% in after-hours trading on Thursday.

“The COVID-19 pandemic has had and will continue to have a significant and adverse impact on our business,” the company said in a statement. “We cannot predict when or if our business will return to normal levels… 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.

“We cannot be certain that we will have access to sufficient liquidity to meet our obligations for the time required to allow our cash generating operations to resume or normalize,” the statement continued. “We may not be able to obtain additional liquidity and any relief provided by lenders, governmental agencies, and business partners may not be adequate and may include onerous terms.”

As of the end of March, AMC had a cash balance of $299.8 million, including borrowings in March 2020 of $215.0 million (the full availability net of letters of credit) under its $225.0 million senior secured revolving credit facility due April 22, 2024.

AMC said that it is confident current cash balance is sufficient to withstand a global suspension of operations until a partial reopening in July.

“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. “If we do not recommence operations by such times, we will require additional capital and may also require additional financing if our operations once reopened do not generate the expected revenues. Such additional financing may not be available on favorable terms or at all.”

S&P Global has downgraded its credit rating for AMC from B to CCC-, taking the company from “highly speculative” to “default imminent, with little prospect for recovery.”

AMC tallied roughly $5 billion in debt at the end of 2019 and losses of $149 million — that was after recording a $110 million profit in 2018. And during the company’s most recent fourth quarter conference call, AMC CEO Adam Aron said that he and other top executives had agreed to cut their salaries and bonuses for three years. That was all before the pandemic shutdown choked its revenue stream altogether.

Experts and industry insiders have been predicting AMC will file for bankruptcy before all is said and done.

AMC will rely on the $2 trillion CARES Act for relief, saying that it intends to seek any available benefits, “including loans, investments or guarantees, and any other such current or future government programs for which it qualifies.”

Based on the company’s analysis of the act, 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.

AMC did say, however, that even when the COVID-19 pandemic subsides, it can’y guarantee the business will recover as rapidly as other industries, or as quickly as others exhibitors.

“We believe, but cannot guarantee, that the exhibition industry will ultimately rebound and benefit from pent-up social demand for out-of-home entertainment, as government restrictions are lifted and home sheltering subsides,” AMC said. “Our business also could be significantly affected should the disruptions caused by COVID-19 lead to changes in consumer behavior (such as social distancing)… 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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