Roku, AMC Theatres, Discovery Tap Credit Lines — For Different Reasons

Movie exhibitors, media companies and some home entertainment tech brands are tapping into lines of credit as the drastic change in business due to coronavirus upend traditional revenue patterns and operations.

Discovery, parent to myriad entertainment brands including HGTV, Food Network and Eurosport, said it borrowed $500 million to help it get through the unprecedented fiscal uncertainties, according to a regulatory filing.

“On March 12, the company drew down $500 million under the credit facility to increase its cash position and maximize flexibility in light of the current uncertainty surrounding the impact of COVID-19,” read the SEC filing. “The company has upcoming corporate debt maturities in June of $600 million and in June 2021 of $640 million.”

Disney March 20 disclosed it was selling $6 billion in bond debt to hold it over during the crisis. “We have closed our theme parks; suspended our cruises and theatrical shows; delayed theatrical distribution of films both domestically and internationally; and experienced supply chain disruption and ad sales impacts,” the company reported in a filing.

AMC Theatres, the world’s largest movie exhibitor, March 20 increased its borrowings under its “revolving credit facilities” as a precautionary measure in order to increase its available cash and preserve financial flexibility during the ongoing global shutdown resulting from the COVID-19 outbreak.

As of March 24, the exhibitor had borrowed $215 million under the credit facility and £89.2 million under the Odeon Credit Facility in the United Kingdom, which constitutes all AMC’s remaining available amounts of available credit.

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Wall Street’s MKM Partners has estimated AMC Theatres has a four-month window to survive in a zero-revenue environment when factoring in its lines of credit.

With word the U.S. Senate would vote March 26 for the third time on a $2 billion stimulus bill, AMC Entertainment shares ended March 25 up about 13%.

Meanwhile, Roku, which co-created the streaming video market with Netflix, borrowed $69.6 million from its credit facility, according to a March 24 regualtory filing.

The Los Gatos, Calif.-based company did not disclose what it intended to do with the funds, but media reports suggest the company is ramping up CE production to meet the demands of quarantined consumers.

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Amazon reportedly has shortages of select Roku and Amazon Fire TV streaming devices. The e-commerce behemoth reports the $39 Roku Premiere streaming player will be in stock April 1, and the $24 Roku Express device would be in stock March 29. Amazon’s standard $23 Fire TV stick is slated to be in stock April 5.

Roku is likely seeing strong active user and streaming activity growth as the pandemic runs it course. The company’s shares finished the day up 8% and gaining 16.1% March 24 following a positive note from Needham analyst Laura Martin.

At the same time, the Roku continues to struggle making a profit. While it is well-positioned to benefit from the rise of streaming services and cord cutting globally, Roku’s path to profitability is unclear, as Roku continues to expand its workforce to support its next leg of growth, according to Wedbush Securities media analyst Michael Pachter.

“Achieving profitability in Roku’s international markets will take time,” Pachter wrote in a March 25 note. “The recent share price decline reined in Roku’s usually lofty valuation, so we are taking this time to lower our price target. As shares are trading within 10% of our price target, we reiterate our ‘neutral’ rating.”