Reports suggest that AMC may not recover from closures & shut down for good

Last Updated on July 30, 2021

AMC Theaters is the largest theater chain in the U.S. with 600 locations nationwide. It came as a blow to the chain and many others when they were forced to go dark amid the COVID-19 pandemic & despite AMC CEO Adam Aron saying he's optimistic that AMC can open its doors by mid-June, a new report is saying that the brand may never recover from shuttering its doors. 

According to a "S&P Global" report, AMC Entertainment’s credit rating has been downgraded from ‘B’ to ‘CCC-’, which means, “Default imminent, with little prospect of recovery." What surprised me the most about this report is finding out that AMC has been teetering on shutdown for years, having issues long before this pandemic ever even started. Here is the full statement from S&P Global:

"We expect AMC Entertainment Holdings Inc.’s (AMC) theaters will remain closed beyond June due to the impact of the global coronavirus pandemic. We do not believe AMC has sufficient sources of liquidity to cover its expected negative cash flows past mid-summer. While unlikely, we could raise the rating if AMC were able to secure additional liquidity without further burdening its capital structure and if we expected the company would be able to generate substantial cash flow in 2021. This would likely require conclusive knowledge about the length of the theater closures and a view that the box office would return to normalized levels in 2021."

This is not the news that employees and moviegoers were hoping for in terms of getting back to AMC in the near future. It's very possible that the chain could get some kind of bail out and help from outside sources before having to publicly announcing a permanent closure but this news doesn't make the situation look promising. It doesn't help that AMC was struggling before the pandemic started, despite being the biggest movie theater presence in the States. AMC reported a $5 billion-plus deficit at the end of 2019 and losses of $149 million for the year. This is after netting $110 million in 2018. AMC's top executives have announced they will take significant pay cuts to keep everything afloat for as long as they can. Additionally, the company has furloughed 600 corporate employees but the S&P reports seems to think that won't be enough.

What could help AMC is if it gains financing through the CARES ACT, a law meant to address the economic fallout of the 2020 coronavirus pandemic in the United States. There is also the option that another big chain, like Regal, could purchase the company and convert AMC theaters to their own. Ultimately there needs to be a clear view that we'll get back to normalcy anytime some but that prospect seems pretty vague. The summer releases have mostly delayed their releases through June, with only Pixar's SOUL so far staying put on June 19. As of now, the first big major release of the summer is MULAN on July 24, which recently announced a new release date after delaying its March release due to the coronavirus pandemic. Will things be back to normal by then? AMC really needs them to be because without significant revenue coming in, the future for the chain is looking very uncertain.

Do YOU think AMC will survive the COVID-19 closures?