Octus Radio Americas Core Credit: Movie Theater Options to Avoid Restructuring (Nov. 22, 2020)
Nov 22, 2020
Peter Washquist, Head of Covenants at Reorg, and Krishan Sutashana, a Distress Bet Analyst, dive deep into the financial struggles of major movie theater chains like Cineworld and AMC. They analyze cash burn rates and liquidity challenges exacerbated by COVID-19. The discussion includes innovative survival strategies, lease obligations in bankruptcy, and the changing landscape of cinema amid shifting consumer habits. Tune in for a fascinating look at how theaters are adapting to stay afloat in these turbulent times.
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Variable Costs Reduce Cash Burn
- Movie theaters have largely variable costs and can reduce expenses by cutting labor and utilities during shutdowns.
- Rent deferrals have been critical to lowering cash burn but will increase cash needs if full rent resumes.
Rent Deferrals Temporarily Reduce Costs
- The majority of deferred Q2 rent will be amortized monthly over the next 2-3 years starting in 2021.
- Rent deferrals have temporarily eased cash burn, but a return to full rent will significantly increase expenses.
Reopening Boosts Cash Burn
- AMC's cash burn increased in July and August due to costs associated with reopening theaters.
- Low attendance post-reopening raised cash burn despite theaters being operational.