AMC Theatres: Exhibitor may file for bankruptcy after stalled reopening

On the heels of announcing that they may run out of cash by the end of 2020, those in the know on Wall Street think that the nation's largest theater chain may have to file for bankruptcy due to the fact that their cash flow problem won't be resolved even by early 2021.

According to an SEC filing, “There is a significant risk that these potential sources of liquidity will not be realized or that they will be insufficient to generate the material amounts of additional liquidity that would be required until the Company is able to achieve more normalized levels of operating revenue." Due to this, a Wall Street analyst says “I really don’t know how they don’t go bankrupt. They should be out of cash by the end of January. And most companies don’t file when they are minus ten million in cash. The attorneys have to be paid.”

Since the announcement that they may be out of cash by the end of the year, AMC shares plunged 13%. By comparison, Cinemark, Marcus, and National CineMedia fell, respectively, 8%, 7.2%, and 9%. All had stabilized in after-hours trade. AMC has acknowledged that they are in a very tight corner. It has about $5 billion in debt and high debt means high-interest expense. AMC, which is majority-owned by Chinese conglomerate Wanda, racked it up pre-pandemic with a string of acquisitions, dividend payments, and upgrades to its theaters. For comparison's sake once again, Cinemark has said it has about 17 months of liquidity and less than half the debt of AMC.

As a part of AMC's SEC filing, the theater chain said it had raised close to $40 million in a stock sale but its cash burn is about $115 million a month and as of August 30 it had about $500 million in funds. The company said today it is considering asset sales, joint ventures, the sale of minority investments, and new rounds of stock or bond sales. It recently sold off its Baltic theaters and had been in talks to divest its Nordic cinemas as well.

This isn't the first time that AMC Theatres has flirted with bankruptcy during the pandemic. Soon after their doors shuttered back in mid-March, talk began circulating that they were in danger of not being able to reopen if they remained closed for too long. It was then that bankruptcy talks began but AMC CEO Adam Aron put those talks to rest when AMC restructured its debt in July giving it some runway but that can only last so long if moviegoing doesn’t resume properly. AMC has opened more than 80% of its U.S. theaters but a lack of new film content drove an 85% same-theater attendance decline and the lack of play in Los Angles and New York, where theaters have yet to reopen, became a huge nuisance to their reopening plans. To put it in perspective, 17% of theaters yet to reopen in those prime areas generated 23% of AMC’s 2019 domestic revenue.

Do YOU think AMC will be forced to file for bankruptcy? What do YOU think their future holds?