AMC Theatres reported Wednesday that the company expects to post a loss of $2.4 billion with the financials from its first quarter in 2020 due to the coronavirus pandemic. Further the largest theater chain in North America announced (via THR) there is substantial doubt that it can “continue as a going concern for a reasonable period of time.”
In everyday parlance, the company is saying unless something substantial changes in their financial prospects in the immediate future, they will likely be forced to file for bankruptcy and potentially go out of business.
This news is not necessarily shocking, even if it is disheartening for movie lovers. S&P Global first sounded the alarm bells about AMC’s prospects when credit rating agency S&P Global downgraded AMC Entertainment’s rating from a B to CCC- back in April. This was due to the fact that despite being the biggest collection of movie theaters in the U.S., AMC was also in major debt even before the current COVID-19 crisis struck. Indeed, even the box office’s banner year in 2019 saw AMC Entertainment bleed $149 million in losses, which only added to the company’s $5 billion debt.
S&P’s report surmised that AMC’s prospects moved from highly speculative to “default imminent, with little prospect of recovery” by the time the company’s leverage covenant with lenders is due to end at the end of June.
However, AMC appeared to be receiving that last minute reprieve in May when it was reported tech giant Amazon might have had preliminary talks with AMC Entertainment about a buyout. Consequently, AMC’s stocks soared through the ceiling for a day. But there has been little concrete information in the public since that glorified rumor. And while it is still possible Amazon would purchase AMC Entertainment, the fact remains the company is still $5 billion in debt with no ability to reasonably reopen anytime soon.
While AMC Theatres’ coffin is not closed yet, its current shaky situation is another testament to the precarious situation of movie theaters. Major competitors like Regal Cinema can weather past June, but the threat of public events being cancelled (or greatly diminished) for potentially well into 2021 is continuing to weigh down on the movie exhibition industry, which is seeing more and more content that once would’ve been certainly earmarked for theatrical debut now moving to VOD.
It’s for that reason AMC threatened Universal Pictures with a ban on their movies after the pandemic is over when the NBCUniversal CEO suggested that the studio would pursue more VOD releases even after there is a vaccine. However, at this rate it’s appearing less likely that AMC will be around to make good on that threat.