Loews Cineplex Entertainment said Thursday it has reached an agreement with its syndicate of lending banks to relax the terms of its revolving credit facility, indicating continued financial pressure as the exhibitor rolls out new theaters.
Loews didn’t provide details, except to note that certain of its financial covenant requirements had been reduced. Wall Streeters said the New York-based chain had rejiggered its debt to cash flow requirement — meaning that it’s now allowed to show less cash flow on the same amount of debt without the banks shutting off the spigot or calling in their loans.
The company, like the rest of the exhibition industry, is feeling the squeeze as it spends heavily on new theaters, which take at least three to six months to become profitable. That means cash outlay isn’t matched by inflow. The pressure on Loews should start to ease up as newer theaters come online and start performing.
Loews Cineplex’ shares rose Thursday, closing up 3.4% to $3.81 amid a buoyant market. The stock, and others in the sector, usually move the opposite direction and have been decimated over the past year. Loews shares were trading at nearly $14 last spring.
Shares of Loews competitor AMC Entertainment was also up, rising 2.4% to $5.31.
Carmike Cinemas gained 0.9% to close at $6.88.
While the stocks look cheap, analysts note that it will still take many months for the industry to recover from its frenetic pace of construction over the last several years.
Loews clearly isn’t the only exhib that has issues with its bankers. Rumors continue to circulate that United Artists and Regal Cinemas may file for bankruptcy or otherwise restructure soon.