AMC Theaters Facing Potential Bankruptcy

AMC Theaters is in serious danger of bankruptcy in the near future if moviegoers don’t return in greater numbers, the world’s largest largest theater chain warned in a public filing on Tuesday.

AMC stated that attendance is down about 85% at 494 of its 598 U.S. locations that it has opened in recent weeks. Theaters in major markets such as New York and Los Angeles are still closed due to the pandemic, and attendance in reopened states is still limited because of social distancing restrictions. The industry is also hurting from a lack of big budget blockbusters to screen, with tentpoles such as No Time to Die and Soul getting delayed or redirected to premium video on demand platforms.

It’s probably not profitable enough to release big budget studio tentpoles when COVID infection rates continue to increase in the United States and Europe. It is also likely financially unwise to debut a major release when theaters are closed in big cities.

“Given the reduced movie slate for the fourth quarter, in the absence of significant increases in attendance from current levels or incremental sources of liquidity, at the existing cash burn rate, the Company anticipates that existing cash resources would be largely depleted by the end of 2020 or early 2021,” AMC stated. “Thereafter, to meet its obligations as they become due, the Company will require additional sources of liquidity or increases in attendance levels. The required amounts of additional liquidity are expected to be material.”

The filing was published soon after a warning issued last week by S&P Global — publisher of the S&P 500 index — which predicted that the AMC would run out of liquidity within the next six months. The ratings agency reduced AMC’s credit rating as a result.

AMC, which has already heavily borrowed and recently renegotiated its debt, said it is exploring various options. These include taking on additional debt and looking into equity financing; renegotiating lease terms with landlords; selling theaters or other physical assets; and exploring joint-venture opportunities. The company said it is now burning through more cash than it is making and will not be able to keep theaters open and operational.  They noted that it is hard to predict how much money they will need to raise.

“There can be no assurance that the assumptions used to estimate our liquidity requirements and future cash burn will be correct, or that we will be able to achieve more normalized levels of attendance described above, which are materially higher than our current attendance levels, and our ability to be predictive is uncertain due to the unknown magnitude and duration of the COVID-19 pandemic,” the filing stated.

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