AMC - AMC Entertainment Holdings

[merkhet]

Worst movie ever is still Sucker Punch. IIRC Richard Roeper’s review was something like “somehow this movie has loud explosions, martial arts, and scantily-clad school girls and still even teenage boys would be bored to tears.”

[Jurgis]

Worst movie ever is still Sucker Punch. IIRC Richard Roeper’s review was something like “somehow this movie has loud explosions, martial arts, and scantily-clad school girls and still even teenage boys would be bored to tears.”

 

Sucker Punch ( https://www.imdb.com/title/tt0978764/?ref_=fn_al_tt_1 ). My rating: 9 out of 10.

 

#YouGuysStillDon'tUnderstandMovies  ::)

[Guest roark33]

https://twitter.com/AMCTheatres/status/1274038584241160192/photo/1

 

Aron is such a clown.  He was on Cramer last night saying no masks, now reversing his policy.  What did he expect last night? 

 

The stock was 30 when it went public in 2015 and 6 today. 

[Foreign Tuffett]

Release dates just keep getting pushed back. Now "Tenet" and "Mulan", the two blockbusters that were supposed to lead the way for cinemas reopening, don't even have release dates at all! 

 

Link to current release dates:

 

https://twitter.com/ErikDavis/status/1286657414834655244

 

I haven't been following the news and rumors surrounding AMC's attempts to finance itself, but I would imagine that going long the stock at this point is a bet on:

 

(a) COVID treatment/vaccine breakthrough and/or

(b) government bailout and/or

© YOLO

[Gregmal]

I still think this is a pretty sure 0, but from a recent call...on AMC opening

 

Craig Kucera

 

Hi. Good morning, guys. I'm curious to hear about your discussions with your movie theater tenants. I know AMC pushed back opening up another couple of weeks this morning. I think, Cinemark is expecting a phase reopening, but just, sort of, curious what you're hearing from them?

 

John Albright

 

Yeah. I would say that they weren't expecting to open up this month or next month, back when we negotiated our deals. I think, where the rubber meets the road is if they're not starting to open up in October, that would be, you know, if things aren't looking great for October then you could be having another discussion with them. But they didn't have any grand plans for late summer. They felt -- lease there, the way they are operating, that things are going to be shutdown until fall.

[txvalue]

Anyone have thoughts on the deal w/ Comcast Universal to shrink the window to 17 days before PVOD in certain cases?

 

Details are scant so it is hard to tell how it will play out and what the deal will mean for other studios and exhibitors. The general industry feedback seems to be that it was an unforced error on AMC's side. Anyone have color on what the PVOD splits might look like? I could see this being not a big deal if it just applies to smaller titles or films that underperform but I wasn't expecting the window to get this compressed this quickly.

 

https://deadline.com/2020/07/universal-amc-theatres-theatrical-window-crush-pvod-agreement-1202997573/

[5xEBITDA]

I like to daydream that Universal was like "we own $50 million of your bonds, agree to the window reduction or you don't get your stupid exchange done"

[Foreign Tuffett]

Baupost/Klarman with some thoughts that are similar to what was being posted in this thread back in June:

 

"Movie theater chain AMC provides a fascinating illustration of the equity market’s

optimism in the face of extremely adverse business conditions. With all its U.S. theatres closed,

the company reported on June 3rd that “substantial doubt exists about our ability to continue as a

going concern for a reasonable period of time.” Nevertheless, soon after this filing, shares of AMC

actually traded above their early-February level. By contrast, over this same time period, AMC’s

subordinated bonds reflected a much harsher reality, trading down from 90 to 30 cents on the

dollar."

 

https://www.cornerofberkshireandfairfax.ca/forum/general-discussion/baupost-q4-2017-letter/30/

[Guest roark33]

To be fair, the unsecured have really gotten screwed in this process because the covenants were so "lite" that AMC has been able to add new debt ahead of them in the capital structure.  The debt markets have been fairly friendly to AMC throughout this process--and that is the reason the equity has retained some value, and even increased as the equity has realized that the runway is longer than initially expected. 

[JRM]

So AMC announces they're going to open 100 theaters with capacity restrictions in place and the stock is up 15%?  They were struggling before COVID-19, no good movies will be released this year, they are giving up their release window, and it likely will cost MORE to operate these theaters at reduced capacity then to keep them shut down.  What is going on here?

[Foreign Tuffett]

So AMC announces they're going to open 100 theaters with capacity restrictions in place and the stock is up 15%?  They were struggling before COVID-19, no good movies will be released this year, they are giving up their release window, and it likely will cost MORE to operate these theaters at reduced capacity then to keep them shut down.  What is going on here?

 

I actually thought the worst part of the release was this: "AMC currently expects to open approximately two thirds of its more than 600 U.S. theatre locations in time for the September 3 release of Warner Bros.’ TENET"

 

This is a biz with middling economics when ALL of the locations are open. Having only 2/3rds of the US locations open just isn't going to cut it. But hey, I guess they have to start somewhere.

 

 

[Foreign Tuffett]

To make a long story short, Tenet has done poorly at the domestic box office so studios are postponing basically every major upcoming movie. We probably won't see another big release until the second half of November.

 

https://www.theatlantic.com/culture/archive/2020/09/hollywoods-tenet-experiment-didnt-work/616345/

 

https://variety.com/2020/film/news/black-widow-release-date-delay-soul-disney-plus-1234769426/

 

 

[txvalue]

To add to FT's comment it is going to make things tough for the American circuits. Many were getting favorable treatment from landlords but now with these big releases pushing back circuits are going to have to make another decision - to stay open with no product or to shutter things again until the end of the year. Many other smaller operators are likely to close up shop.

 

I like Cineplex and Cinemark here, but Cineworld and AMC continue to be in hot water. AMC did get a fairly nice break from EPR so their liquidity is probably ok.

 

AMC finally started selling some assets dumping their Baltic region cinemas for 77 million in August, but they are also looking to modify a court order so they can reacquire some theaters they had to let go in the Carmike deal (the owners defaulted in July). Where there is an unnecessary acquisition to be had you can bet Aron will be nearby.

[hasilp89]

I used to ignore all the comments about Aron when I was bullish on the stock. Since I took my lashings and losses and moved on I’m better able to laugh at him now. Quite the gem in their earnings call below, what a joker, comparing himself to Churchill. Smh.

 

“ With that as context, I often find myself thinking of the extraordinary famous and defining speech that then British Prime Minister Winston Churchill delivered in the House of Commons on June eight of 1940, when he laid out the challenge facing Britain's early during the Second World War. He said in part, We shall not flag or fail. We shall fight on the seas and oceans. We shall fight in the air. We shall defend our island. We shall fight on the beaches. We shall fight on the landing grounds. We shall fight in the fields and in the streets. We shall fight in the hills. That is exactly where we are now at AMC. We are fighting this virus with all of our smarts and all of our might. We are a resilient, resourceful and creative bunch of AMC. And all of that energy is being deployed to fight the good fight to that end”

[Foreign Tuffett]

https://www.cnbc.com/2020/12/03/warner-bros-to-release-every-2021-movie-on-hbo-max-at-the-same-time-as-theaters.html

 

To continue Aron's Winston Churchill comp, this the equivalent of the Wehrmacht occupying Westminster

[hasilp89]

https://www.cnbc.com/2020/12/03/warner-bros-to-release-every-2021-movie-on-hbo-max-at-the-same-time-as-theaters.html

 

To continue Aron's Winston Churchill comp, this the equivalent of the Wehrmacht occupying Westminster

 

that is savage. lol

[Foreign Tuffett]

Market cap at the beginning of the year:  ~ $775 million

 

Market cap today with the stock at $4.01:  ~ $732 million

 

 

Makes perfect sense

[Gregmal]

At Costco earlier, I saw an irresistible offer that as a value guy, I wanted to take advantage of. 2 AMC movie passes for $6! As much of a no brainer as this seemed, I took a second to think. I haven't been to the movies in half a decade, maybe somewhat longer. I 100% won't be going there for the next 12-18 months simply because nothing even halfway decent is going to be released. Even beyond that timeline, with kids, streaming, and all that...I still wasnt even confident the "never expires" offer would hold value for me if we're talking 2+ years out and the good chance that I'd just lose the ticket/pass like I do anything I put away for more than a month or two. So I passed.

 

This coming from someone who looks incredibly fondly on the whole movie experience. From seeing Beauty and the Beast with my mother and siblings, to going with my father to an 8pm screening of Jurassic Park as a child...as a teenager, the movies were the best place to get a bj when the parents were occupying "my" house, to using the movies as a place to kill 2 hours with a date before dinner once I was off on my own....its always been fun and enjoyable. But reality is, this isn't like an amusement park. Where everything is there and once the gates open people come back. Its a multi layered scheme where if the studios dont see a slam dunk ROI, they aint spending $100M+. They dont spend money, people dont go. And all this is predicated on people even being allowed to go...something that still hasn't even been resolved. Even down the line, the only way I see myself, a young mid 30s father, going to the movies is to take my kids to something crazy, which would likely be at an IMAX. As an investment/business, I really dont see how a theatre is going to do anything but lose insane amounts of money for the next 24-36 months. Hope I'm wrong though. No position.

[Guest roark33]

The other problem with AMC and all the theaters is that they and their smaller competitors are closing money-losing locations.  This shrinks the footprint and gives studios even more reason to move to day and date or completely bypass the theaters.  The studios don't care if an individual theater is money losing since they get their cut from the total gross of the ticket sales.  If theater count declines, overall ticket revenues will decline, unless we see massive price increases. 

 

Additionally, the dollar of streaming revenue is being valued much more highly than a dollar of box office revenue, regardless of the P&L impact, for now, so studios are responding to the incentives and pushing more content to streaming, earlier or entirely skipping the theaters.

[5xEBITDA]

RIP

 

---------------------

 

AMC said in an 8-K today that it estimates that its cash and cash equivalents at Nov. 30 amounted to about $320 million, compared with $417.9 million at Sept. 30. Between Oct. 1, and Nov. 30, the company received net proceeds of about $152.4 million from prior at-the-market equity offerings, which is reflected in its Nov. 30 cash and cash equivalents balance. Excluding the impact of the at-the-market equity offerings, this represents an average monthly cash burn rate of about $125 million during October and November.

 

In the absence of additional liquidity, the company anticipates that existing cash resources will be depleted during January 2021. To remain viable through 2021, the company currently estimates that it will require at least about $750 million of additional liquidity to fund its cash requirements, although this estimate is subject to a number of assumptions and may vary materially. Given the uncertainty regarding the company’s ability to raise material amounts of additional liquidity and the uncertainty as to the time at which attendance levels might normalize, substantial doubt exists about the company’s ability to continue as a going concern for a reasonable period of time.

 

AMC said it currently estimates that if attendance levels do not significantly improve during the first half of 2021 (so as to achieve an overall level of about 20% of pre-Covid 2019 attendance levels) and again during the second half of 2021 (so as to achieve an overall level of about 85% of pre-Covid 2019 attendance levels), then it believes the liquidity shortfall would be greater than the estimated $750 million minimum shortfall, which if not addressed would prevent AMC from continuing as a going concern.

 

AMC said it is actively pursuing potential sources of additional liquidity, including:

 

Additional equity financing: The company intends to pursue an at-the-market program that includes up to about 178 million shares. To date, the company has raised about $155.2 million through the sale of 50 million shares of its common stock pursuant to its prior at-the-market offering programs.

Landlord negotiations: Commencing in 2021, its cash expenditures for rent are scheduled to increase significantly as a result of rent obligations that have been deferred to 2021 and future years that are in excess of $400 million as of Nov. 30. In light of the liquidity challenges, and in order to avoid bankruptcy, it believes that the company must reach accommodations with its landlords to abate or defer a substantial portion of the company’s rent obligations, in addition to generating sufficient amounts of liquidity through the at-the-market program and the other potential financing arrangements discussed below, and the company intends to enter into additional landlord negotiations to seek material reductions, abatements and deferrals in our rent obligations. Depending on the outcome of our negotiations and in the absence of satisfactory arrangements, AMC may cease to make rent payments, the result of which may permit landlords to threaten or seek potential remedies, including acceleration of obligations or involuntary insolvency proceedings. Its ability to generate additional liquidity and its future viability will depend in large measure on successfully addressing our rent obligations.

Potential European financing: AMC said it is in discussions regarding potential financing alternatives for its international businesses, relying on permitted borrowing capacity under its £100 million European credit facility and/or permitted baskets that have been generated under certain of our debt instruments by virtue of equity it has raised. AMC has reached no agreement providing for additional indebtedness, and it may not reach any agreement on commercially acceptable terms or at all.

Additional first lien debt.

Other creditor discussions: AMC said it has entertained various proposals from creditors or their advisors, held discussions of varying degrees, held diligence sessions and in some cases exchanged term sheets. The company said it expects these activities will continue and intensify. The company expects that creditors that hold predominately second lien debt will continue to be supportive of its efforts to avoid bankruptcy as a result of their debt ranking junior to first lien debt and therefore their concern that they would experience lower recoveries in a bankruptcy scenario. AMC expects to continue to explore alternatives that include new-money financing, potentially in connection with converting second lien debt to equity, which would help manage its leverage but would be dilutive to holders of its common stock. In contrast, certain first lien creditors and other parties have indicated a willingness to provide financing in a bankruptcy scenario, including debtor-in-possession financing. The company also expects that it will need to engage with creditors under the first lien credit facility as a result of its covenant holiday that resumes in connection with the second quarter of 2021, from which AMC expects it will need an additional waiver, based on currently expected results. The company said it expects to continue to receive from and discuss proposals with all classes of creditors. These discussions may not result in any agreement on commercially acceptable terms or at all.

Joint venture or other arrangements with existing business partners and minority investments in capital stock: AMC continues to explore other potential arrangements, including equity investments, to generate additional liquidity.

In the event the company determines that these sources of liquidity will not be available to it or will not allow it to meet its obligations as they become due, it will need to change course and pursue an in-court restructuring of its liabilities, and in the event of a future liquidation or bankruptcy proceeding, holders of the company’s common stock would likely suffer a total loss of their investment.

 

Further, AMC said it cannot predict what supply of movie titles will be available for theatrical exhibition once moviegoers are prepared to return in large numbers. Nor can it know with certainty the impact of the Warner Bros. announcement or any similar announcements regarding the release of movie titles concurrently to the home video or streaming markets, as those arrangements will be subject to negotiations that have not yet taken place.

 

As of Nov. 30, the company was operating at 404 of its 594 U.S. theaters, with limited seating capacities and during limited opening hours. The company’s closed U.S. theaters include theaters in some of its major markets, such as New York City and in California. During the fourth quarter from Oct. 1 to Nov. 30, AMC experienced an overall attendance decline in the U.S. of about 92% compared with a year earlier.

 

As of Nov. 30, the company was operating at 108 of its 359 leased and partnership international theaters, with limited seating capacities and during limited opening hours. During the fourth quarter from Oct. 1 to Nov. 30, AMC experienced an overall attendance decline in its international theaters of about 86% compared with a year earlier.

[JRM]

Anybody else notice the enterprise value is higher now than at the beginning of 2020?

 

https://ycharts.com/companies/AMC/enterprise_value

[5xEBITDA]

Anybody else notice the enterprise value is higher now than at the beginning of 2020?

 

https://ycharts.com/companies/AMC/enterprise_value

 

Because they have been adding debt. Compare to market cap. https://ycharts.com/companies/AMC/market_cap

[KJP]

Anybody else notice the enterprise value is higher now than at the beginning of 2020?

 

https://ycharts.com/companies/AMC/enterprise_value

 

Because they have been adding debt. Compare to market cap. https://ycharts.com/companies/AMC/market_cap

 

Yes, much more of the EV now consists of debt rather than equity.  But if EV is the best indicator of the value of the business, isn't it surprising that the market is saying that the value of an existing movie theater business has not changed, despite the apparently increasing desire of the big studios (Disney, Universal, Warner) to put new movies directly onto their streaming services to grow streaming subs?  Put another way, the market appears to be putting a very high multiple on companies that may be able to build very large subscription streaming businesses, yet doesn't seem to be devaluing one of the legacy distribution methods (movie theaters) that would appear to lose out in the transition to streaming.

 

You can see the same thing in other industries, such as autos.  If Tesla is going to rule the world, as its market cap implies, then wouldn't Toyota and GM lose out in that process?  Yet the market has bid up both.  Is auto manufacturing all of sudden structurally a much better business such that the industry as a whole is worth 5x what it used to be?  Stated more generally, it's usually possible to look at an individual company and make a case for its specific valuation, or at least articulate a future world in which the current valuation is justified.  But that world doesn't seem to be consistently reflected in the valuations of other companies in the same industry.  (Or perhaps that is all nonsense, because all equity is much more valuable at a 1% discount rate.)

 

I do note that EV ought to use market value of debt rather than face value.  So, I don't know if part of the issue with AMC is that the EV number from ycharts isn't doing that.

[5xEBITDA]

Anybody else notice the enterprise value is higher now than at the beginning of 2020?

 

https://ycharts.com/companies/AMC/enterprise_value

 

Because they have been adding debt. Compare to market cap. https://ycharts.com/companies/AMC/market_cap

 

Yes, much more of the EV now consists of debt rather than equity.  But if EV is the best indicator of the value of the business, isn't it surprising that the market is saying that the value of an existing movie theater business has not changed, despite the apparently increasing desire of the big studios (Disney, Universal, Warner) to put new movies directly onto their streaming services to grow streaming subs?  Put another way, the market appears to be putting a very high multiple on companies that may be able to build very large subscription streaming businesses, yet doesn't seem to be devaluing one of the legacy distribution methods (movie theaters) that would appear to lose out in the transition to streaming.

 

You can see the same thing in other industries, such as autos.  If Tesla is going to rule the world, as its market cap implies, then wouldn't Toyota and GM lose out in that process?  Yet the market has bid up both.  Is auto manufacturing all of sudden structurally a much better business such that the industry as a whole is worth 5x what it used to be?  Stated more generally, it's usually possible to look at an individual company and make a case for its specific valuation, or at least articulate a future world in which the current valuation is justified.  But that world doesn't seem to be consistently reflected in the valuations of other companies in the same industry.  (Or perhaps that is all nonsense, because all equity is much more valuable at a 1% discount rate.)

 

I do note that EV ought to use market value of debt rather than face value.  So, I don't know if part of the issue with AMC is that the EV number from ycharts isn't doing that.

 

I don't think it is quite applicable in this case given the trading prices of AMC debt - first lien (60/70), second lien (~20), subordinated (< 10).

[KJP]

Anybody else notice the enterprise value is higher now than at the beginning of 2020?

 

https://ycharts.com/companies/AMC/enterprise_value

 

Because they have been adding debt. Compare to market cap. https://ycharts.com/companies/AMC/market_cap

 

Yes, much more of the EV now consists of debt rather than equity.  But if EV is the best indicator of the value of the business, isn't it surprising that the market is saying that the value of an existing movie theater business has not changed, despite the apparently increasing desire of the big studios (Disney, Universal, Warner) to put new movies directly onto their streaming services to grow streaming subs?  Put another way, the market appears to be putting a very high multiple on companies that may be able to build very large subscription streaming businesses, yet doesn't seem to be devaluing one of the legacy distribution methods (movie theaters) that would appear to lose out in the transition to streaming.

 

You can see the same thing in other industries, such as autos.  If Tesla is going to rule the world, as its market cap implies, then wouldn't Toyota and GM lose out in that process?  Yet the market has bid up both.  Is auto manufacturing all of sudden structurally a much better business such that the industry as a whole is worth 5x what it used to be?  Stated more generally, it's usually possible to look at an individual company and make a case for its specific valuation, or at least articulate a future world in which the current valuation is justified.  But that world doesn't seem to be consistently reflected in the valuations of other companies in the same industry.  (Or perhaps that is all nonsense, because all equity is much more valuable at a 1% discount rate.)

 

I do note that EV ought to use market value of debt rather than face value.  So, I don't know if part of the issue with AMC is that the EV number from ycharts isn't doing that.

 

I don't think it is quite applicable in this case given the trading prices of AMC debt - first lien (60/70), second lien (~20), subordinated (< 10).

 

 

That makes more sense.