Is Odeon set to make a Hollywood comeback?: White & Case advise lenders on the refinancing of the Odeon Group

March 27, 2021

3 min read

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What's going on here?

White & Case has advised a series of lenders including Cross Ocean Partners on the refinancing and upsizing of the Odeon Cinemas Groups’ credit facilities. 

What does this mean?

On Monday 22nd February, White & Case announced that it had successfully advised a multitude of lenders on the refinancing of the Odeon Cinema Group. This transaction will pump an additional £400m into the cinema giant, helping the company to meet existing debts whilst bolstering the Group’s liquidity. The deal represents an important capital injection into the company, as attendance levels have sunk 90% since cinemas were forced to switch off their screens in the March 2020 lockdown. Shammer Shah, a partner in White & Case’s debt finance team, commented that the deal was an “important finance transaction [for] the entertainment sector, which has been severely impacted by the coronavirus pandemic”. 

These positive comments were reflected by the chief executive of Odeon’s parent company, AMC Entertainment in his prediction that bankruptcy is now “off the table”. Indeed, White & Case’s work is only part of a much bigger financing project, with the Odeon Group raising nearly $1bn in debt finance and equity markets over the last month. However, the firm’s recent equity raising is attached to some quite stringent repayment conditions. For instance, Mudrick Capital management has attached an interest rate of up to 17% putting the groups long-term financial health into question. 

What's the big picture effect?

Whilst it seems Odeon’s new funding has saved the cinema chain from the clutches of COVID-19 in the short-term, many critics believe their long-term financial health is still in jeopardy. The new funding will allow AMC to stay afloat until July 2021, assuming pre-coronavirus attendance levels are restored and continue to rise considerably thereafter. However, the significance of this assumption should not be overlooked. With many headline movies like the new James Bond film: ‘No Time To Die’ being postponed three times since the beginning of the pandemic, it is easy to question whether Odeon will have the ‘blockbuster’ return they are hoping for

John Dixon, a high yield bond trader at Dinosaur Financial Group, cannot see “folks rushing back to the cinema”. Dixon emphasises the allure of streaming platforms which allow users to sit in their own comfortable apartments with “popcorn and soda [at] a fraction of the price”. Dixon’s views are representative of a consumer shift caused by the emergence, and dominance, of streaming platforms like Netflix and Amazon Prime. The rise of such streaming services have threatened the cinema industry by allowing users to stream popular films like The Wolf of Wall Street and Daddy’s Home. Pre-COVID-19, Odeon was charging nearly £10 a film ticket, the equivalent to a whole month’s Netflix subscription. With Netflix gaining an additional 15.8m subscribers within the first three months of 2020 and posting a total revenue of $6.4bn in the fourth quarter of the same year – are Odeon’s days numbered?

Regardless, Odeon’s struggles are simply a drop within a much bigger ocean. Kelly Jeffs, CEO of the Light House Cinema, commented that his businesses’ income has dipped “90% day-on-day”. Unfortunately, this is not an isolated incident. Karl Markwick, the owner of the Picture House, saw cinema attendance levels fall from 1,000 per day, pre-COVID-19, to just 65 before the UK entered its first lockdown. 

On the whole, the Odeon Group has been rescued by a series of lenders advised by White & Case. Whilst the loan will allow the cinema chain to survive in the interim, the effects of the COVID-19 pandemic and the growing use of streaming services, like Netflix, question the Group’s long-term future. To beat its competitors, Odeon could lower its prices, meaning the days of smuggling popcorn into the cinema will be a thing of the past! 

Report written by Luke Cuthbert

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