Things continue to look grim for AMC Theatres in the long run, but the company was just thrown a lifeline and has avoided bankruptcy. For now. AMC, the largest movie theater chain in the U.S., is saddled with massive debt and the ongoing closure, which kicked off in mid-March, has hit its business particularly hard. However, the company is now restructuring its debt to avoid bankruptcy in the short-term.
According to a new report, AMC is currently hammering out a restructuring deal. The deal is being headed up by Silver Lake, which owns $600 million of AMC's huge debt load, said to be in the $5 billion range. It would have bondholders provide a $200 million loan and would swap out "their unsecured claims at a discount." AMC is favoring this option over a route from Apollo Global, as well as other lenders. The company is said to have been trying to make a deal with its bondholders for weeks, seeking to swap debt at a discount.
The good news for AMC is that its shares were up once reports of this deal surfaced. The company's stocks rallied by around 20 percent. Be that as it may, AMC has still lost around 40 percent of its total value this year.
Setting aside the complicated inner-workings of this deal for a moment, the main takeaway is that AMC has been giving a tiny bit of breathing room that will allow them to try and weather the storm. But the big question is, how long can they keep this up? $5 billion is a tremendous amount of debt and t the exhibition business faces as great many uncertainties in the future. At present, the plan is for AMC, as well as Regal and Cinemark, to be open by the end of the month. However, as we've seen, those dates are very much subject to change.
Even once theaters reopen, there are abundant hurdles that need to be cleared and questions that need answering. First off, it remains to be seen how willing the general public will be to return to the movies. Several surveys have suggested quite a few Americans will be hesitant. Aside from that, new safety measures put in place are costly and will impact business as well. Auditorium capacity will be reduced, online ordering for concessions and tickets will be in place and extra sanitation measures are being enacted. This comes at a cost, and with reduced capacity, there exists a lower ceiling for potential profit per screening.
The major chains are largely waiting to open up until there are some big, new movies to show. Right now, Tenet and Mulan are on deck to be the first through the door in August. In the weeks leading up to those releases, AMC and other chains will show old classics and former blockbusters at a discounted rate to drum up business. Will that be enough to avoid bankruptcy? Time will tell. We'll be sure to keep you posted as the situation develops. This news comes to us via the The Wall Street Journal.