The Village Roadshow Ltd (ASX: VRL) share price barely reacted to management's commitment to undertake a capital raising in the coming months.
Shares in the cinema and theme park operator dipped 1.4% to $2.10 following its latest update when the S&P/ASX 200 Index (Index:^AXJO) gained 0.3% in the last hour of trade.
It's a tough environment for entertainment facilities operators with the COVID-19 shutdowns and social restrictions.
But Village Roadshow wanted to show it didn't need a takeover to remain viable as it secured extra debt facilities to last for another 12 months.
Flying with one engine
While its Queensland-based theme parks have reopened given the state's success in controlling the pandemic, social restrictions remain in force. This means its theme parks can only run at half their capacity and only local visitors have been patronising these facilities.
Its cinemas in Melbourne have also been forced to shut under the state's new hard lockdown measures, while attendance in other states are curbed to comply with social distancing rules.
Bleeding cash
Management said it continues to run at a loss despite the federal government's JobKeeper support program.
"With the reopening of several of its operating businesses, VRL's previous monthly net cash costs of negative $10 -$15m per month has reduced," said Village Roadshow in its ASX statement.
"However, the Company is still operating on a negative cash basis which it expects will continue for several months."
Cash runway to last next 12-months
To ensure its survival and to strengthen its bargaining position with suitor BGH Capital, management is taking on more debt.
The group secured an extra $70 million from existing lenders and the Queensland Treasury Corporation and $43 million of this needs to be repaid within 12 months. The balance is due in five-years.
Looming $35m capital raising
As a condition of the new facility, Village Roadshow committed to raising a minimum of $35 million in new equity. This needs to be done before the group's half year results announcement in February 2021 or three months after BGH withdraws its bid for the company, whichever happens first.
BGH lobbed a non-binding offer for the group and is willing to pay up to $2.40 a share. Village Roadshow and the bidder are locked in exclusive discussions, which are ongoing.
Climbing a mountain of debt
While Village Roadshow is yet to drawn down on the new debt facility, it expects to do so as it only has $5 million in undrawn debt from its existing facility.
The $5 million is part of a $340 million loan, with $230 million of this due in January 2022 and the balance needing to be repaid in January 2024.
Management said it also had unrestricted cash available of around $40 million to help fund operations.
Village Roadshow and its peers have underperformed the market since the start of the year. The VRL share price dropped by 45% over the period, while the Ardent Leisure Group Ltd (ASX: ALG) share price slumped 76% and Crown Resorts Ltd (ASX: CWN) share price lost 23%.
