AMC Entertainment Holdings won’t be moving forward with its initial discussions with lenders about its potential acquisition of theaters in the Cineworld Group chain across the U.S. and Europe. AMC, which is the world’s largest movie theater chain, made the decision after Cineworld filed for Chapter 11 bankruptcy protection on September 7, according to The Hollywood Reporter.
The news of the acquisition talks between the two movie theater chains was contained in an SEC filing AMC issued yesterday, which follows the Chapter 11 bankruptcy filing by Cineworld. The latter is the world’s second-largest movie theater company. It owns Regal Cinemas in the U.S. and operates 747 theaters and 9,139 screens in 10 countries around the world.
AMC said its talks with Cineworld lenders focused on securing strategic alternatives, which ultimately didn’t happen. As a result, “A definitive agreement with the lenders has not been reached regarding the terms of any proposal to be presented to the debtors in the Cineworld cases, and at this time negotiations are not continuing,” AMC added in the regulatory filing.
Cineworld’s assets also weren’t acquired by AMC because the latter has its own high debt load. Even as the world’s largest movie theater chain, AMC was still severely damaged financially by the initial impact of COVID-19, as theaters around the world were completely closed for most of 2020.
AMC also said that any possible acquisition of Cineworld’s assets would be financed in part by issuing AMC Preferred Equity units, or APEs, to shareholders and debt financing provided by the lenders. In August, AMC announced its preferred share APE as a special dividend for shareholders and a means to raise capital in the future.
Approximately $162 million has already raised from AMC’s APEs since it launched the stock to pay down debt and fund strategic acquisitions of distressed theater assets.
During the discussions, AMC said Cineworld didn’t provide any confidential or non-public information, analyses, compilations, forecasts and other documents to the lenders. As a result, not only has a definitive deal not been reached between the two companies, but AMC added that here was no assurance that it would resume talks with Cineworld.
“While AMC reserves the right to continue to explore the acquisition of value enhancing strategic assets, there can be no assurance that AMC will resume any discussions with the lenders or, if it were to do so, that it would be able to agree with lenders or any other party as to the terms of a mutually acceptable proposal,” AMC added in a cautionary statement in the SEC filing.
In order to move forward with the acquisition of certain Cineworld assets, AMC must be certain that the global box office will continue to improve next year. The world hasn’t yet returned to pre-pandemic levels, however, as the number of movies that are currently being released in theaters hasn’t yet reached what it was before the start of COVID-19. There are also continuing concerns about how the pandemic is still affecting major film markets around the world, including China.
Cineworld has announce a bankruptcy settlement with its landlords and lenders that will allow it to borrow funds and make a $1 billion debt repayment. The announcement comes after the company agreed to explore a sale of the business and allow creditor input on its business plan as part of its bankruptcy settlement.