Commentary

Financial woes continue to challenge indoor and outdoor entertainment venues

Restructuring activity continues worldwide in the indoor and outdoor entertainment sectors.

Image courtesy of iStock.

February 15, 2021 by Kevin Williams

A fair amount of restructuring has taken place on the social entertainment landscape of late, with serious implications for both indoor and outdoor entertainment.

One of the hardest hit sectors has been cinemas.

Just as 2020 came to a close, it was revealed that the veteran movie studio, distributor and producer, MGM, was placing its operation up for sale. The studio failed to find interested buyers for its 26th James Bond motion picture, "No Time to Die," in behind closed-door discussions. But the situation brought on by outstanding debts and a roster of big budget movies unable to be screened proved too much for the executive board, that now turned to sale as their only option.

A price tag of some $5 billion has been placed on the operation that, along with blockbuster movie releases, also comprises a vast library of classic movie and television content and IP. This was the first major studio victim of the inevitable COVID situation — with industry speculation that Apple and Netflix are the most likely interested buyers.

MGM has a considerable history in the resort and entertainment venue business, having licensed its IP such as with the MGM Casino Resort operation license, and negotiations towards full partnerships to open licensed parks, such as the Disney-MGM Studios, or the never-completed MGM Studio Theme Park project in South Korea, alongside numerous other licensed attractions.

This may be the first, but is obviously not going to be the last.

Global health crisis hits

Cineplex Entertainment, one of the largest North American movie theater chain operators, revealed that it had started the process of selling its Toronto headquarters office building to raise some $90 million. The corporation was doubly wounded by the global health crisis, seeing the closure of the majority of its cinema locations and loss of revenue, but also the collapse of an agreed acquisition by Cineworld Group, in a $2.1 billion deal that has now been abandoned and involves an ongoing legal dispute. The ability to have access to actual funds through the sale of the property is expected to be essential to Cineplex's continued operation, having already struck an agreement with creditors for relief into 2021, of the outstanding debt of $350 million.

The momentum of this move, with new investment to support a changed landscape, continued soon after the Cineplex news broke. Rival and market leader AMC Entertainment Holding was linked to information that it had managed to secure a commitment to receive $100 million in cash for January 2021. This came after a long period of speculation that the corporation would have to consider bankruptcy protection.

The last-minute deal to inject liquidity into the corporation comes as new first lien debt financing from Mudrick Capital Management and is supported by other lenders. AMC had been reported to have debts of some $2.3 billion in senior subordinated bonds, while being the largest movie exhibition company in the EU and U.S., representing some 960 theaters.

Along with a long line of Western investors, AMC had a majority investment made into the international operation by Chinese conglomerate Wanda Group in 2012, and had depended, before the pandemic, on funding from this partnership. Now, following the new cash injection, major restructuring and a significant investment in Cinema Entertainment Center business is expected on the back of current developments.

At the same time, not all the company's cinema business is impacted. For example, AMC Entertainment Holdings announced the opening of its sixth movie theater in Saudi Arabia in December. The UAE market is showing strong signs of recovery following its period of lockdown, and AMC is also promoting an ambitious schedule to open another 50 locations in this territory by 2024 – as the remaining Western operation teeters on the brink.

Meanwhile, the dine-in cinema chain Studio Movie Grill, comprising some 33 venues throughout the U.S., has also filed for bankruptcy protection.

Parks and resorts also under stress

These financial woes aren't confined to cinemas, thanks to COVID, although many of the projects that are at the front of restructuring and acquisition can trace serious cash problems and business fault lines to long before March 2020.

One of the most recent developments was the news that Dubai government-backed holding corporation Meraas Leisure and Entertainment had made an offer to the majority shareholder of DXB Entertainments, owners of Dubai Parks & Resorts — operators of some four parks, six family entertainment centers and two hotels in the region, including Bollywood and LEGO Dubai parks.

In an agreement supported by the government, along with outstanding bonds, they would convert some $1.6 billion in debt and take control of the problem project by buying back shares and taking them private. DXB Entertainments has been mired in difficulties since its creation in 2014, with recent grandiose plans for the development of new amusement park projects abandoned, such as the highly publicized Six Flags theme park project that was later scrapped.

The operation depends heavily on tourism and the postponement of the Dubai Expo was the final straw, compounded by poor management and an inability to raise funding as the brand softened — placing DXB in this spiraling condition that required the indirect emergency governmental bailout. It would be later revealed that the board of directors have accepted the resignation of the CEO, who would be stepping down upon this news, and major restructuring of the operation would be commencing.

Plenty of uncertainties remain, as 2021 promises to be an interesting year for both indoor and outdoor entertainment.

(Editor's note: Extracts from this blog are from recent coverage in The Stinger Report, published by KWP and its director, Kevin Williams, the leading interactive out-of-home entertainment news service covering the immersive frontier and beyond.)

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About Kevin Williams

Along with advisory positions with other entrants into the market he is founder and publisher of the Stinger Report, “a-must-read” e-zine for those working or investing in the amusement, attractions and entertainment industry. He is a prolific writer and provides regular news columns for main trade publications. He also travels the globe as a keynote speaker, moderator and panelist at numerous industry conferences and events. Author of “The Out-of-Home Immersive Entertainment Frontier: Expanding Interactive Boundaries in Leisure Facilities,” the only book on this aspect of the market, with the second edition scheduled for a 2023 release.

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