Cineworld needed AMC’s apes
[1/2] People are seen at a Cineworld in Leicester’s Square, amid the coronavirus disease (COVID-19) outbreak in London, Britain, October 4, 2020.
NEW YORK, Aug 19 (Reuters Breakingviews) - Two cinema chains embarked on aggressive global dealmaking, racked up debt then crashed into the industry-incinerating Covid-19 pandemic. Now, shares in one of them – AMC Entertainment (AMC.N) – are up by 200% since March 2020. The other, Cineworld (CINE.L), is down 97% and preparing for bankruptcy, according to the Wall Street Journal. Meme-stock mania made the difference.
Acquisition binges left Cineworld with debt equivalent to 7.6 times adjusted EBITDA at the end of 2019, and AMC with debt at 6.3 times. After the pandemic struck, AMC looked to restructure its leverage, negotiating between sharp-elbowed private equity firms Silver Lake Partners and Apollo Global Management (APO.N). Meanwhile, Cineworld scrapped a $1.65 billion deal to acquire Canada’s Cineplex (CGX.TO).
But then things changed. Retail traders juiced AMC’s stock, giving the company access to equity markets. It aggressively took advantage, raising $1.8 billion in 2021.
It’s the primary way the companies’ fortunes diverged – both are still lagging 2019 results, and both warn the film slate for the remainder of this year is weak. But, as AMC boss Adam Aron said earlier this week, his company has over $1 billion in cash, courtesy of retail frenzy. Cineworld missed its meme moment. (By Jonathan Guilford)
(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)
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