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Struggling AMC to raise $500 million amid the coronavirus crisis. But when will theaters reopen?

AMC Theaters
AMC Theatres said it will raise $500 million in a private debt offering in order to stay afloat during the public health emergency that forced the closure of all 1,000 of its global locations.
(Frederic J. Brown / AFP/Getty Images)

President Trump on Thursday offered beleaguered movie theaters a glimmer of hope that they could gradually return to business in the coming months, as the nation’s largest cinema chain said it plans to raise $500 million to survive the coronavirus crisis.

AMC Theatres said it will raise the money in a private debt offering to stay afloat during the public health emergency that forced the closure of all 1,000 of its global locations, including about 630 in the U.S. Domestic cinemas have been closed since mid-March because of government restrictions meant to curb the spread of the virus.

Theater owners have increasingly begun to float the possibility of reopening sometime in July, in the middle of what would normally be Hollywood’s summer blockbuster movie season. Some executives have even raised the prospect of partially opening as soon as mid-June. But AMC’s offering of first lien notes, due in 2025, comes amid lingering uncertainty.

Some analysts have predicted that the prolonged coronavirus cash crunch could force heavily indebted AMC to file for Chapter 11 bankruptcy protection from creditors. AMC, burdened with long-term debt of $4.85 billion and no revenue coming in, has laid off or furloughed thousands of workers, including 600 corporate staffers all the way up to Chief Executive Adam Aron.

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As of March 31, the Leawood, Kan., company had a cash balance of $299.8 million, including borrowings of $215.0 million in March, the company said Thursday in a statement. AMC said its balance sheet should sustain the company “until a partial reopening in July.” The new debt offering should give the exhibitor a significantly longer runway.

“We believe the company will have sufficient liquidity to withstand a global suspension of operations until a partial reopening ahead of Thanksgiving,” AMC said.

Though it remains unclear when theaters will be allowed to resume operations, exhibitors and studios have begun to prepare for business resuming in early July, though the COVID-19 situation remains fluid. Theaters that reopen would have strict guidelines to limit seating capacity in order to conform to social distancing rules.

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The Trump administration on Thursday released guidelines on reopening the nation’s economy, including multiplexes, while saying that governors will have authority over the return of their states’ businesses.

The federal guidelines offered states a phased approach. Under the first phase, movie theaters, restaurants, gyms and large sporting venues can reopen if they adhere to strict social distancing rules. However, states should begin the phase only if they meet criteria including a 14-day decrease in coronavirus cases or a reduced trajectory of positive tests. Under the second phase, venues would be able to moderately ease physical distancing regulations as long as the virus doesn’t rebound.

The National Assn. of Theatre Owners, the Washington lobbying group for cinema owners, declined to comment on the White House guidance.

However, the guidelines represented a modicum of hope for the exhibition industry, in part because they put movie houses in the same category as restaurants and other venues that would be allowed to resume business in the first phase of the economy’s reopening.

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Eric Wold, an analyst at B. Riley FBR, said the White House statements provided “some level of clarity” for the exhibition industry’s potential restart. This, however, did not change Wold’s projections for when theaters will be up and running.

“We remain comfortable with our expectation of a mid-June restart, with initially limited attendance (both due to social-distancing guidelines and consumer reluctance), and a film slate mostly composed of library content,” Wold wrote in a Friday note to clients.

Mooky Greidinger, chief executive of Regal Cinemas’ British parent company, Cineworld Group, said there’s still no firm timeline, but the company is “optimistic.”

“There is no way today that we can make any decision about an opening date,” Greidinger said in a statement. “However, we are optimistic that we will be able to open toward the second half of June, subject of course to an understanding with the studios about new releases. The studios are our main partners, and both parties should be convinced what is the right date to reopen our theaters.”

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Cinemark Holdings executives on Wednesday gave Wall Street analysts a rough plan of how its circuit may pursue a reopening in the coming months.

Sean Gamble, Cinemark’s chief operating officer and chief financial officer, said on a conference call that the company anticipated a July 1 opening, which would be in time for major rescheduled studio releases, including Walt Disney Co.'s “Mulan” and Warner Bros.’ Christopher Nolan film “Tenet.”

Under that scenario, the Plano, Texas, company, which has laid off 17,500 workers and pursued a $250-million debt raise, would start rehiring employees in June and kick off marketing initiatives to attract consumers.

That would begin a “three-month slow build of operations,” Gamble said. For the first couple of weeks, theaters would probably stick to showing older studio movies as moviegoers slowly grow more comfortable with going to theaters.

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“We’re having great discussions already with the studios about a range of different tactics to get the theatrical exhibition engine restarted,” Gamble said.


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