AMC Theatres Will Likely File For Bankruptcy According to Analyst. Previously, we reported that AMC Theatres would likely remain closed through Summer 2020, possibly further, and it seems the popular theater chain may be forced to file for bankruptcy due to forced closures during the COVID-19 pandemic. That is, according to Wall Street analyst Eric Handler, of MKM Partners.
“Based on our view that theaters will be closed until at least August and our belief that AMC lacks the liquidity to stay afloat during that time, we expect the company will soon be faced with filing for bankruptcy,” Handler said in a report on Thursday. “Further fueling our liquidity concerns is AMC’s decision to stop paying rents to landlords.”
Handler is convinced there will be a major shift in operation even if AMC is saved with a government bailout. Currently, it is believed AMC had $600 Million saved to help offset lack of operation, with the projected cost to maintain operations throughout the closure hanging at around $155 Million/month it is unlikely AMC will last past June or July.
“We believe the weight of its balance sheet will make for tough sledding given the company’s high leverage, thus making reorganization inevitable,” Handler shared.”We believe the company’s monthly cash burn rate in a no-revenue environment is running at $155 million per month, which likely keeps AMC liquid until June/July.”
AMC Theatres has not shared a public update regarding their theaters since their announcement on March 17th stating they are complying with officials during the closure.
In compliance with local, state, and federal #COVID19 directives, all #AMCTheatres locations are now closed for at least 6-12 weeks. AMC Stubs A-List memberships will be paused automatically during the time AMC theatres are closed.
— AMC Theatres (@AMCTheatres) March 17, 2020
According to a report by Variety, S&P Global Ratings reduced AMC Theatres rating from a B to a CCC-. “We do not believe AMC has sufficient sources of liquidity to cover its expected negative cash flows past mid-summer, and we believe the company will likely breach its 6x net senior secured leverage covenant when tested on Sept. 30, 2020, absent a waiver from its lenders,” S&P Global shared in their ratings note.
“The company will likely pursue incremental financing through the CARES act or its lenders, but it is unclear when or if it will be able to secure additional liquidity,” S&P Global stated.
It is currently unknown when AMC Theatres will re-open, if at all, but we hope they will be able to recover and keep providing the excellent movie-going experience we have come to know and love in Disney Springs at Walt Disney World and Downtown Disney District in Disneyland. Be sure to check back here at Chip and Co. for all things Disney!
Featured Photo Credit: AMC Theatres
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