Shares of movie theater operators AMC Entertainment (AMC) and Cinemark (CNK) were slipping in Monday afternoon trading after a Cinemark representative told Barron's that the company has not engaged in any deal talks with AMC or its representatives, denying an earlier report from the New York Post.
NY POST: Last Friday evening, the New York Post's Josh Kosman reported that Cinemark was eyeing a deal for AMC's struggling movie theater locations, as theater operators have been challenged amid the coronavirus pandemic. Cinemark has recently signaled to industry executives that it is interested in taking over many of AMC's locations should the company default, as it has racked up hundreds of millions of dollars in back rent over the course of this year, Kosman said, citing sources close to the situation. One insider told Kosman that Cinemark was not currently in talks with AMC's landlords, adding that the company has no immediate plans to pursue negotiations.
BARRON'S: Today, however, Teresa Rivas of Barron's reported that a Cinemark representative said the company "has not engaged in any discussions with AMC or any representatives regarding M&A activity, and there is no merit to the report. Consistent with our previous commentary, Cinemark’s first priority is refortifying our balance sheet following the financial impact of Covid-19.” The theater operator will weigh any M&A opportunities that arise, the representative told Rivas. “There’s absolutely no truth to the recent reporting in the New York Post,“ a highly placed person at AMC also told Barron’s. “It is utter nonsense, made up out of whole cloth.”
WHAT'S NOTABLE: The news comes after AMC Entertainment late last week secured $100M from Mudrick Capital, adding in a regulatory filing that, in the absence of additional liquidity, the company estimates that that existing cash resources will be depleted during January 2021. To "remain viable" through 2021, AMC currently estimates that it will require at least approximately $750M of additional liquidity to fund its cash requirements, it said. Following the news, the New York Post's Kosman reported that Apollo Global (APO), along with Canyon Capital Advisors and Davidson Kempner Capital Management, are holders of AMC's first-lien debt and are urging the company to file for Chapter 11 bankruptcy. The private equity firms have offered $1B in debtor-in-possession financing, Kosman said, noting that the deal would keep AMC's theaters open in the coming year and land AMC in the hands of of the investment firms, the sources said.
PRICE ACTION: In afternoon trading, AMC shares are down nearly 17% to $3.26 while Cinemark is 2.7% lower at $15.82 per share.
Keywords: fly intel, wall street, movie theaters, cash reserves