Item 1.01 Entry into a Material Definitive Agreement
Odeon Commitment Letter
On
The Term Loan Facility will have a maturity of 2.5 years from the date on which it is first drawn. Borrowings under the Term Loan Facility will bear interest at a rate equal to 10.75% per annum during the first year and 11.25% thereafter. Odeon will have the ability to elect to pay interest in cash or in PIK interest for each interest period.
All obligations under the Term Loan Facility will be guaranteed by certain
subsidiaries of Odeon. The Company will also provide a limited recourse
guarantee. Subject to the terms of the Commitment Letter, including customary
agreed security principles, all obligations under the Term Loan Facility will be
secured by security over certain classes of assets in
Subject to the terms contained in the Commitment Letter, the Term Loan Facility will contain a number of covenants that are substantially similar to the covenants set forth in Odeon's existing £100,000,000 revolving credit facility. In addition, the Term Loan Facility will contain a minimum liquidity covenant for Odeon and its subsidiaries. The Term Loan Facility will also contain certain customary events of default.
Equity Distribution Agreement
On
Subject to the terms and conditions of the Equity Distribution Agreement, the
Sales Agents will use reasonable efforts consistent with their normal trading
and sales practices, applicable law and regulations, and the rules of the
Each Sales Agent will receive a commission up to 2.5% of the gross sales price of the Common Stock sold through it as the Company's Sales Agent under the Equity Distribution Agreement, and the Company has agreed to reimburse the Sales Agents for certain specified expenses. The Company has also agreed to provide the Sales Agents with customary indemnification and contribution rights. The Company is not obligated to sell any Common Stock under the Equity Distribution Agreement and may at any time suspend solicitation and offers under the Equity Distribution Agreement. The Equity Distribution Agreement may be terminated by the Company at any time by giving written notice to the Sales Agents for any reason or by each Sales Agent at any time, with respect to such Sales Agent only, by giving written notice to the Company for any reason.
The Company intends to use the net proceeds, if any, from the sale of the Common Stock pursuant to the Equity Distribution Agreement for general corporate purposes, which may include the repayment, refinancing, redemption or repurchase of existing indebtedness or working capital, capital expenditures and other investments.
The Common Stock will be offered and sold pursuant to the Company's shelf
registration statement on Form S-3 (File No. 333-251805) filed on
Item 2.02 Results of Operations and Financial Condition
To the extent related to the historical financial results, the information set forth in Item 8.01 below is incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
To the extent required by Item 2.03 of Form 8-K, the information set forth in Item 1.01 above is incorporated herein by reference.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
Effective as of
The foregoing summary of the Certificate of Amendment and the Bylaws Amendment does not purport to be complete and is qualified in its entirety by reference to the Certificate of Amendment and the Bylaws Amendment, copies of which are filed as Exhibit 3.1 and Exhibit 3.2, respectively, to this Current Report on Form 8-K and both of which are incorporated herein by reference.
Item 8.01 Other Events.
The Company has provided the following update, which should be read in
conjunction with the update included on Form 8-K dated
Current Operating Update
Effective vaccines against the coronavirus, which are expected to become widely available this year, together with the expected release later this year of major movie titles that have so far been delayed, are expected to have a material positive impact on our industry and have generated optimism that movie theatre attendance levels ultimately will significantly rebound from current levels.
In the meantime, however, a significant spike in coronavirus cases, together with continuing delays of major movie releases or the direct or simultaneous release of movie titles to the home video or streaming markets in lieu of theatre exhibition, have led to theatre closures, prevented the opening of theatres in major markets and have had, and are expected to continue to have in the future, a material adverse impact on theatre attendance levels and our business.
· As of
theatres, with limited seating capacities and during limited opening hours. The Company's closedU.S. theatres include theatres in some of its major markets, such asNew York City and inCalifornia . During the fourth quarter of 2020, we experienced an overall attendance decline in theU.S. of approximately 92.3% compared to the same period a year ago.
· As of
partnership international theatres, with limited seating capacities and during limited opening hours. During the fourth quarter of 2020, we experienced an overall attendance decline in our international theatres of approximately 88.6% compared to the same period a year ago. Liquidity Update
The Company estimates that its cash and cash equivalents at
Since the Company's prior liquidity update on
This additional liquidity obtained by the Company to date will significantly extend our liquidity runway. The length of our liquidity runway will largely depend on future attendance levels.
In the absence of any increase in attendance levels and assuming continued
landlord concessions and no additional liquidity, our existing liquidity would
extend our operations through to
If attendance levels increase, we currently estimate that our existing liquidity, together with a portion of the proceeds we anticipate receiving under our continuing at-the-market equity program and additional landlord concessions, would be sufficient to fund our operations during the remainder of 2021. This requires an assumption that our attendance levels achieve approximately 10% of pre-COVID 2019 attendance levels during Q1 2021, 15% of pre-COVID 2019 attendance levels during Q2 2021, 65% of pre-COVID 2019 attendance levels during Q3 2021 and 90% of pre-COVID 2019 attendance levels during Q4 2021.
Our estimated 2021 cash burn includes the repayment of certain deferred rent amounts from 2020. Our additional liquidity requirements in the future will depend on the cash we generate from our operations and our ability to obtain further rent concessions from our landlords.
The Company is actively pursuing potential sources of additional liquidity, which is essential to our long-term viability, including:
· Additional Equity Financing. The Company intends to continue to pursue an
at-the-market program that includes up to approximately 63.3 million remaining shares under our existing at-the-market programs (including the shares to be sold under the Equity Distribution Agreement). The amount of liquidity we might generate will primarily depend on the market price of our Class A common stock, trading volumes, which impact the amount of shares we are able to sell, and the available periods during which sales may be made. As ofJanuary 22, 2021 , the Company has raised proceeds of approximately$565 million , before fees, through the sale of approximately 214.8 million shares of its Class A common stock pursuant to its at-the-market offering programs. Because our market price and trading volumes are volatile, there is no guarantee as to the amounts of liquidity we might generate or that our prior experience accurately predicts the results we will achieve.
· Landlord Negotiations. Commencing in 2021, our cash expenditures for rent were
scheduled to increase significantly as a result of rent obligations that have been deferred to 2021 and future years that are approximately$450 million as ofDecember 31, 2020 . In light of our liquidity challenges, and in order to establish our long-term viability, we believe the Company must continue to 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. Accordingly, the Company has entered into additional landlord negotiations to seek material reductions, abatements and deferrals in our rent obligations. In connection with these negotiations, we have ceased to make rent payments under a substantial portion of our leases and have received notices of default, the result of which may permit landlords to threaten or seek potential remedies, including termination of leases, acceleration of obligations or involuntary insolvency proceedings. We continue to renegotiate leases with landlords to attain additional concessions. To the extent we achieve substantial deferrals but not abatements, our cash requirements will increase substantially in the future.
· Other Creditor Discussions. While the liquidity we have raised has
substantially extended our liquidity runway, the new debt we have raised or
that has been committed, together with the higher interest rate payments that
will be required in the future but have largely been deferred, will
substantially increase our leverage and future cash requirements. These future
cash requirements, like our deferred rent obligations, will present a challenge
to our long-term viability if our operating income does not return to pre-COVID
levels. Even then, we believe we will need to engage in discussions with our
creditors to substantially reduce our leverage. We expect to continue to
explore alternatives that include new-money financing, potentially in
connection with converting debt to equity, which would help manage our leverage
but would be dilutive to holders of our Common Stock. We expect we will
continue to receive from and discuss proposals with all classes of creditors.
These discussions may not result in any agreement on commercially acceptable
terms.
We are also in discussions with our revolving lenders under our first-lien credit facility to seek a waiver from the requirement to maintain a secured leverage ratio specified therein while a certain amount of revolving loans are outstanding thereunder. We previously received a waiver that established a holiday from complying with this covenant, which resumes in connection with the second quarter of 2021 and which we do not expect to be able to satisfy. We can give no assurances with regard to our ability to obtain a waiver, failure of which would be expected to result in a default under our first-lien credit facility.
Similarly, under our first-lien credit facility, an event of default will occur
if the independent auditor's report in our annual financial statements includes
a "going concern" or like qualification or exception, except in limited
circumstances. Therefore, prior to the issuance of our audited financial
statements for the year ended
· Joint-Venture or Other Arrangements with
Minority Investments in Our Capital Stock. We continue to explore other potential arrangements, including equity investments, to generate additional liquidity.
The Company is unable to determine at this time whether these potential sources of liquidity will be available to it and there is no guarantee, as we have previously disclosed, that we will obtain liquidity that will be sufficient for our requirements.
It is very difficult to estimate our liquidity requirements, future cash burn rates and future attendance levels. Depending on the Company's assumptions regarding the timing and ability to achieve more normalized levels of operating revenue, the estimates of amounts of required liquidity vary significantly. Similarly, it is very difficult to predict when theatre attendance levels will normalize, which we expect will depend on the widespread availability and use of effective vaccines for the coronavirus. However, our current cash burn rates are . . .
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits: Exhibit No. Description 1.1 Equity Distribution Agreement, dated as ofJanuary 25, 2021 , by and betweenAMC Entertainment Holdings, Inc. andGoldman Sachs & Co. LLC andB. Riley Securities, Inc. 3.1 Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation ofAMC Entertainment Holdings, Inc. 3.2 Second Amendment to the Third Amended and Restated Bylaws ofAMC Entertainment Holdings, Inc. 5.1 Opinion ofWeil, Gotshal & Manges LLP . 23.1 Consent ofWeil, Gotshal & Manges LLP (included in Exhibit 5.1).
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).
© Edgar Online, source