AMC needs to raise $750m to survive

[Leo Enticknap]

This from Bloomberg, via Newsmax:

(Bloomberg) -- AMC Entertainment Holdings Inc. needs to raise at least $750 million to stay open and might go bankrupt if the effort doesn’t succeed.

The world’s largest movie-theater chain said in a filing Friday that without new financing, existing cash will be depleted as soon as next month. To remain viable through 2021, AMC is looking at selling more shares, financing from European sources and deals with debt holders including Mudrick Capital Management.

Current stockholders probably will be wiped out if AMC winds up in bankruptcy, the company said. Its shares fell as much as 5.4% after the disclosure; the stock fell 0.11 cents to $3.98 at 2:22 p.m. in New York.

Theater chains have been hard hit during the Covid-19 pandemic by government-mandated shutdowns, and then by the reluctance of moviegoers to risk attending. The problem has been compounded by movie studios delaying major releases that would attract more customers.

Scarce Attendance

Attendance at AMC’s U.S. locations fell 92% in the fourth quarter from the same period a year ago. The company has limited capacity and hours, and chose to close some of its U.S. theaters. In large markets such as New York City and Los Angeles, cinema chains have been unable to reopen any locations.

AMC is negotiating rent breaks with its landlords, before more than $400 million of deferred rent comes due next year, and said it must reach an agreement to ease a “substantial portion” to avoid bankruptcy.

Cash stood at around $320 million as of last month, down from $418 million in September, according to the filing. Excluding recent equity offerings, AMC’s average monthly cash burn was about $125 million during October and November.

{ snip }

AMC’s continued liquidity troubles come with few signs emerging that cinema attendance will recover soon. Despite enthusiasm about vaccines rolling out, it will take until well into the second quarter of 2021 for a critical mass of moviegoers to be inoculated -- and they might still be skittish about filling theaters.

Moves by Hollywood production studios augur poorly as well. AT&T Inc.’s Warner Bros. shocked the industry last week when it said all 17 of its planned major releases in 2021 will debut simultaneously on the company’s HBO Max streaming platform and in theaters. AMC responded that it would urgently talk with WarnerMedia about “economic terms that preserve our business.”

© Copyright 2020 Bloomberg News. All rights reserved.

Some of it snipped to ensure that this copying and pasting qualifies as fair use. The snipped bits detail negotiations with individual lenders (full story at the link above).

It's heartening to read that there are investors prepared to consider putting up the money, given the bleak short to medium term outlook for theater chains. They must believe that the studios putting all their eggs into the streaming basket is going to backfire in the long term, and/or that in the aftermath of the pandemic, theaters will increasingly source content from outside Hollywood.

[Bobby Henderson]

I think it's arguably a bit stupid how the government is basically sitting on its hands allowing the movie theater industry to implode. I'm not sure what the government can do to help other than provide emergency loans or some other kind of assistance (preferably at really low interest rates). Movie theaters are anchor businesses in many commercial districts. They do more to entice people to visit a commercial district to shop, dine and be entertained. If a commercial district loses enough quality of life type businesses, such as movie theaters, then it will be harder for that commercial district to get potential customers to leave the house. They'll do more shopping and everything else from home. That's bad for any local economy. Every city and town needs its brick and mortar businesses. If everyone does all their shopping at Amazon and streams all their entertainment "main street" will suffer big time.

[Leo Enticknap]

As I understand it, a new federal relief bill has run aground on partisan disagreements as to what does and doesn't go in it. The airline industry was asking for an individually tailored bailout, too. The main difference is that civil aviation has a sustained lobbying presence in DC, whereas our industry appears not to. Not that it's done them much good so far.

[Harold Hallikainen]

It's a real interesting policy question. The fifth amendment to the US Constitution says "... nor shall private property be taken for public use, without just compensation." Is the shutdown of a business to prevent the spread of disease a "taking for public use?" Also, business interruption insurance often excludes interruption by disease (see, for example, https://www.nytimes.com/2020/08/05/b...-pandemic.html ). Insurers, of course, have to calculate risk and charge premiums accordingly. If the were to cover a pandemic, and survive, the premiums would possibly be so high that no one would buy the insurance.

We have two major effects of this pandemic: people getting sick and economic impact. I hope that after this is done we take the time to review what should be done for the next time. What was effective in preventing the spread of the disease? What was ineffective? What is the lowest cost way of preventing the spread? How should impacted people and businesses be compensated to allow their survival?

Harold

[Steve Guttag]

What could make this even more sticky for the government is that they have shut down theatres with zero evidence that there was any cause. And as the statistics have come in from those theatres that have been open, zero has pointed to cinemas as being a cause of spread and, as such should have been excluded from full shutdown and been placed in a more-like category like Airplanes. I find the whole thing, as it has been handled tantamount to pointing into a crowd and screaming "murderer" without the evidence to back the claim.

This country, typically, has no shortage of lawyers to try and sift out these things, if those most effected were to seek legal compensation/remuneration for being wrongly shut down and the consequences of being put out of business.

[Leo Enticknap]

The fifth amendment to the US Constitution says "... nor shall private property be taken for public use, without just compensation." Is the shutdown of a business to prevent the spread of disease a "taking for public use?"

And especially if the taking is only temporary (allegedly, at any rate). If a lawsuit is ever brought on those grounds, it'll be interesting to see what the SCOTUS makes of it, to put it mildly. I'd heard one of the talk radio people float the idea that continuing to levy property tax on land and buildings used by businesses that have been forced to close by government order could amount to unreasonable seizure per the Fourth Amendment, too; and that a business lobbying group in Southern California was exploring the feasibility of legal action based on that angle.

The depressing thing about the movie theater industry's situation is that NATO appears to have accepted that we're "nonessential," and that nothing can be done until the authorities decide to let theaters operate normally again.

[Harold Hallikainen]

I have not heard anything about the NATO lawsuit ( https://www.natoonline.org/wp-conten...-Complaint.pdf ) since July. My court search account at Pacer stopped working due to not being used for several months. I just sent an email to get it restored. I'll have a look at the briefs and case status when I can.

Harold

[Mark Lane]

"It's a real interesting policy question. The fifth amendment to the US Constitution says "... nor shall private property be taken for public use, without just compensation." Is the shutdown of a business to prevent the spread of disease a "taking for public use?" Harold Hallikainen

That is the way I see it Harold. We filed papers with the courts in April that reserved our rights to sue to state under these ground. The lawyer filed the papers which will allow us to look at the idea filing a suit in the future.

Our theater sets 50 inches from a church who can fill their building with their congregation. They can sing, dance, preach, have power point presentations and even show a movie is they wanted to.. but my building 50 inches away can't show a movie to the public.. They can fill their building but something must happen in those 50 inches that makes the theater dangerous to the public.

[Steve Guttag]

A church (or other place of worship) is always going to be treated differently as the 1st amendment specifically puts restrictions on what government can do with respect to religions. One would hope that the leader of said church would want what is best for their congregation and devise means to do so but I, personally, don't see where any form of US government has the authority to prevent people from worshiping at their place of worship. It is like 2A arguments versus what can be done with respect to driving...firearms are an enumerated right and as such are going to have a much higher hurdle to overcome to deny someone of said right and would require due-process.

While theatres are, unfortunately, neither compulsory nor granted a specific enumerated right, that does not excuse a government over-reach, even during a pandemic, to put unreasonable restrictions on their operation without any clear evidence...in fact with evidence to the complete contrary. However, if NATO (both nation and at the local levels) in concert with every cinema, don't make these facts known to the various governments, nobody in the government is going to go out of their way to treat cinemas any differently than they have...it is far easier to just shut everything down except clear essential (grocery stores, pharmacies...etc.).

[Marcel Birgelen]

I think Steve just provided the answer to our mutual problems: We should start a new religion and movie theaters are our churches.

[Martin McCaffery]

I've been telling people that for years. People come to a theatre to sit in a darkened room and worship a flickering light. Sounds religious to me (and on the verge of violating this forum's ban on religious talk)

[Martin McCaffery]

I, personally, don't see where any form of US government has the authority to prevent people from worshiping at their place of worship.

The US Gov't, and by extension state and local gov't, have lots of Supreme Court approved power to take actions that affect churches as long as the churches are not being specifically targeted. For instance, human sacrifice is not permitted anywhere, including churches which may want to claim it as part of their religion. Snake handling laws exist, but their constitutional validity has not been taken to the US SC. Taking peyote for religious purposes can be prohibited if peyote consumption is prohibited in general. Let's not overlook building, fire, plumbing and electricity codes.
So limiting attendance in all places of gathering can include churches (although it would have to pass a strict scrutiny test). The government isn't preventing them from worshiping, it is preventing (or limiting) the gathering on a temporary basis. A fine distinction, but that is what makes legal tests.

[Leo Enticknap]

It is like 2A arguments versus what can be done with respect to driving...

For a brief moment I thought you were referring to a claim that states should not be able to deny anyone the legal right to drive on the grounds that a car is an "arm!" But after a brief Google search, I discovered that the legal challenge was actually a response to some states automatically revoking the firearms licenses of everyone who is convicted of DUI (the rationale being that if you can't be trusted to keep yourself sober when using your car, the same likely applies to your gun), which is a far more difficult issue, given that it puts 2A in direct opposition to states exercising their 10A right to enact public safety measures.

As for religion, I remember, around two decades ago, walking past York Minster in England, one of the world's oldest, largest, and most historically significant Christian churches. A (I'm guessing, atheist) co-worker commented, "If only we could get those [insert pejorative term for Christians here] out, that place would make a great IMAX 4-plex."

The acoustics would have been problematic, though.

[Steve Guttag]

Martin, without getting too far down the legal rabbit hole...All rights hit their limitation when it comes how they may interact with another's rights...as such human sacrifice in the name of religion does not excuse premeditated murder. An often misinterpretation of yelling "fire" in a crowded movie theatre...the problem wasn't the exercise of one's 1A rights, it is the responsibility for the consequences of exercising said rights (causing stampedes, deaths as a result of a false alarm). Every movie theatre has a fire alarm that does "yell" fire in a theatre if it has been activated (heck...they even speak to you now).

And no, one cannot invent a religion in order to get around a law. 1A has long be held that one has a right to their beliefs...not necessarily their actions.

However, merely going to worship at one's church is pretty fundamental to the religious concept. It does not, in and of itself, violate any laws and any laws that would be enacted to restrict such an activity would need to be constitutionally tested. In fact, we just saw that happen with New York's COVID restrictions and was struck down by the US Supreme Court. There is a large canyon of difference between what may happen if multiple, consenting people of faith attend their religious service that their clergy has continued to make available and due to that circumstance they may contract a virus which may prove harmful (all of the way up to death) and the outright human sacrifice. A case where one has to make the equivalence of attending church services equates to premeditated murder is not a case many would want to take.

[Lyle Romer]

The constitutional issues of these restrictions stem from a few clauses.

1) The 14th Amendment states, "No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws." Restricting "non-essential" businesses while allowing others to operate denies equal protection of the laws to the businesses being shut down or restricted. There can be measures taken across the board but if Walmart is allowed to operate at 50% of indoor capacity with social distancing protocols, it is unconstitutional to say that a movie theatre can not.

2) As stated in a post above, the Fifth Amendment states "nor shall private property be taken for public use, without just compensation." Ordering the closure or changing the operational rules of a legally established business is, for all intents and purposes, taking private property for public use (the use being keeping people out). If a State law was in place to allow these actions, it must come with just compensation. The definition of "just compensation" would have to be adjudicated because it isn't reasonable to assume the business would earn pre-pandemic revenue without the restriction. Speaking specifically of Florida, there is no law on the books that allows for these actions. No power is granted to any elected official to do any of these things in a public health crisis.

3) In the event that a State does not have laws on the books which allow these actions, it is unconstitutional to create them and apply them to existing businesses that were already operating. This includes if the Governor broadly interprets executive powers and essentially makes temporary laws. Article I, Section 10 states, "No State shall... pass any... ex post facto Law." For sure in Florida and most likely all other States, all actions taken to restrict businesses would be considered ex post facto laws. You can't change the rules in the middle of the game.

As a practical matter, if the businesses were "justly compensated" for the impact of the restrictions imposed, I don't think that 99% would have any issue complying. Just because a measure is scientifically proven to slow the spread of the SARS-CoV-2 virus, it does not make it legal or constitutional.