NEW YORK — Cineplex Odeon Corp. failed to meet financial conditions set by its bank loan agreements on Dec. 31 and may not meet the conditions in the future, it says in its annual accounts, which were filed Thursday with the SEC.
The troubled exhibitor said its bankers recently agreed to amend the conditions of its bank agreements for the fourth quarter of last year and for all of this year. The conditions relate to Cineplex’s earnings in proportion to its debt, and the exhibitor noted that uncertainty about admission and concession revenue meant future breaches could occur.
Cineplex has breached its bank loan agreements several times in the past couple of years, prompting renegotiation of the agreements. Thursday’s warning highlighted that the exhibitor, despite raising equity last year and begin-ning a theater rebuilding program, is not yet out of the financial woods. Cineplex stock was unchanged at $1.50.
Following the lead set by other major exhibitors such as Regal Cinemas and AMC Entertainment, Cineplex is try-ing to modernize its circuit. It said in the filing that it spent $17 million last year, opened two new theaters and refurbished five others in the U.S., adding 31 screens, while it added 44 in Canada. It also opened a theater in Bu-dapest, Hungary.
This year, Cineplex said it expects to spend $30 million, opening 14 new theaters with 151 screens and moderniz-ing seven theaters with the addition of 38 screens. Funding will come from internal cash flow and its bank line.
But it has little margin for error. Cineplex generates virtually no free cash flow — earnings before interest, taxes, depreciation and amortization was $50 million last year, but out of that it had to pay interest costs of $35.4 million, taxes and other expenses.
It had $68 million of its bank line available on Dec. 31, although it also has to repay $20 million of the bank line this year in addition to funding the building program.
The one positive is that business for most exhibitors has been up strongly so far this year, driven by the “Star Wars” re-release.