AMC Theaters Forced to Sell 15 Million Shares to Stave Off Bankruptcy

AMC Forced to Sell 15 Million Shares to Stave Off Bankruptcy

AMC Theatres has warned it may have no other choice than to file for Chapter 11 bankruptcy if it can’t find other sources of liquidity soon.

The company made the disclosure in a filing with the SEC on Tuesday about an agreement with Citigroup Global Markets and Goldman Sachs to sell up to 15 million class A shares. Last month AMC raised $54 million in a similar agreement with Citigroup and Goldman.

“In the event the company determines that these sources of liquidity will not be available to it or will not allow it to meet its obligations as they become due, it would likely seek an in-court or out-of-court restructuring of its liabilities, and in the event of a future liquidation or bankruptcy proceeding, holders of the company’s common stock would likely suffer a total loss of their investment,” AMC said in the SEC filing.

“We will require significant amounts of additional liquidity and there is substantial doubt about our ability to continue as a going concern for a reasonable period of time; holders of our Class A common stock could suffer a total loss of their investment,” AMC added.

AMC further disclosed that it had $417.9 million in cash on hand as of September 30th, which is down from the $508 million cash balance reported on August 31st.

In response shares of AMC Entertainment Holdings declined over 12% to $3.09 in Tuesday trading.

On October 2nd, Standard and Poors warned that AMC is in danger of defaulting on its debt because of the ongoing COVID-19 pandemic, which has made it extremely difficult to generate revenue. S&P downgraded AMC’s credit rating from CCC+ to CCC-, which moved it into the junk bond category, citing the continual struggles of the exhibition industry. All of the major studios have been delaying big budget releases in the United States after the lackluster performance of Christopher Nolan’s Tenet, which has grossed only $50 million after seven weeks due to the reluctance by audiences to attend.

Over the last weekend, Liam Neeson’s thriller Honest Thief made it to first place at the domestic box office, though only at an underwhelming $4.1 million. The theaters that have reopened have had to resort to reducing hours of operation or closing down entirely due to the low levels of attendance.

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