Singaporean entertainment mini-conglomerate MM2 Asia says that it is continuing to look at a spin-off IPO of its cinema exhibition business, even though it has signed a term sheet with a potential buyer.

The SGX-listed company filed a clarification Tuesday, some two weeks after it revealed that it had signed an agreement to sell at least 80% of MM Connect to privately-owned investment firm Kingsmead Properties.

MM Connect is the unit that encompasses the group’s eight cinemas in Singapore, 13 cinemas in Malaysia and a film distribution business. The Malaysian and Singaporean assets were acquired in two separate deals unveiled respectively in 2016 and 2017.

The Kingsmead offer gives “a valuation of between S$80 million and S$120 million ($58.9 million-$88.3  million) for the whole cinema business, on a debt and liability free basis,” MM2 has said.

The clarification said that MM2 will continue working towards an IPO of the cinema businesses and go ahead if the Kingsmead bid either fails or is not completed before the IPO. In that case, Kingsmead would be able to convert its deposit into shares of the unit at a discounted price.

Theatrical film business in both Singapore and Malaysia have been badly beaten up by the COVID-19 pandemic. Since March 2020, cinemas in Malaysia have been shuttered for nearly a year, and saw 2020 revenues drop by 90%, due to government restrictions known as a Movement Control Order. Malaysian local media has suggested that cinemas may be in the last phase of the MCO unwinding and may not reopen until 2022.

In Singapore, cinemas are currently allowed to operate, but only under strict conditions, after the country returned to “phase two (heightened alert) status.” These conditions limit theater capacity to 100 people if the cinema provides pre-event testing, but only 50 people without testing. Group size is limited to two people and cinemas are not allowed to serve food or drinks.

The difficult conditions tipped MM2 into loss for the financial year to March 2021 and caused its liabilities to exceed assets by S$120 million. The company’s auditor in July said that “a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern.” MM2 has responded by pointing to its raising of S$54.7 million ($40.3 million)in a rights issue in April, and other refinancing measures.

In the recent cinema sale filings, MM2 has said: “given the challenges faced by, among others, cinema operators since the COVID-19 outbreak, the proposed (Kingsmead) transaction would provide more financial stability to the group as a whole.”

It said that the deal would also allow it “to de-leverage itself which would strengthen its balance sheet,” and that “the sale of a majority stake in the cinema business would allow the group to focus on its core business of movie production and content creation,” which it says are enjoying pandemic-related spikes in streaming demand.