AMC Theaters Could File for Bankruptcy Soon

AMC Theaters

AMC Theaters is on the brink of collapse due to the COVID-19 situation, and things are not looking well for them.


The company announced yesterday they will run out of liquidity by the end of the year or early next year, and the situation is not going to change anytime soon, as there are no major blockbusters left to debut this calendar year, except for Wonder Woman 1984, which I can perfectly see getting delayed as well. In addition, the two biggest markets in the U.S., New York and Los Angeles, are not allowed to open their venues.


But that is not it. Not only are movies getting delayed, but the industry as a whole is experiencing a major shift towards streaming and online content distribution. Earlier this week, Disney announced a major restructuring to refocus its efforts around Disney Plus, which does nothing but justify the company’s latest moves over the past few months. Not only did they move Mulan to a new form of premium subscriptions within Disney Plus, which they called Premium Access, or decided to move Pixar’s Soul to the platform with no extra charge, but they also have been announcing many high-profile TV shows, both from Marvel (they have up to eight series that we know of in some form of development right now) and Star Wars, which is getting ready to start shooting a live-action show centered around Cassian Andor next month, plus another show centered around Obi-Wan Kenobi, which will shoot next year. They are also debuting the second season of the hit series The Mandalorian in two weeks, and already have plans for seasons three and four.


It is true that these live-action TV shows in and of themselves do not represent a major hurdle for AMC Theaters, but they do give us an insight into what is going on over Disney’s headquarters, and theatrical releases do not seem to be a top priority. Whether or not they should is a worthy debate to have, because, on the one hand, they do make most of their money through ticket sales, and they did not make $13 billion last year via Disney Plus subscriptions, but on the other hand, they already have several investments made on the theatrical side of the business for the next few years, while the Disney Plus library, while rich, is lacking of original content a great deal. In fact, a recent study shows that they are way behind other competitors like Netflix or Amazon Prime. They can only keep people watching The Mandalorian for so long.


However, it is yet unknown whether there will be any movie theaters left to show the movies Disney has in development and plans to debut over the next few years. And the same goes to all other studios. In a SEC filing, the company said:


“[AMC Entertainment] believes its cash burn to date is in line with the Prior Update. However, 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. 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.”


There really is no right answer here. Studios cannot risk their hundred-million-dollar investments to tank in theaters, one after another, but theaters can only keep their lights on for so long showing independent and replayed movies before they have to close for good. And Tenet‘s debut was bad news for everybody, because a month and a half later, the movie has made less than $50 million in the U.S. (although New York and most California citizens have not had the chance to watch it yet), and has barely crossed the $300 million mark worldwide, which is less than half of what the movie had to make to become profitable for Warner Bros.


While this is something applicable to all movie theater chains, AMC Theaters’ situation is perhaps the worst one. The pandemic hit right before some of the company’s biggest investments of the past few years started to pan out. After making several theater acquisitions and upgrading several venues they already owned, they had to close shop due to the pandemic. After the SEC filing yesterday, its shares had plunged 13% when the markets closed.


On the bright side, the company has raised up to $40 million in a stock sale, and after a major debt restructuring that happened over the summer, AMC Entertainment was able to bring in several hundreds of millions in cash, reduce interest payments, and extend maturities on loans, according to Deadline. However, they are also burning $115 million a month, and they have around $500 million left in funds. The company is saying that they are considering several ways of survival, including the sale of minority investments or new rounds of stock or bond sales. They have most recently sold off its Baltic theaters.


A Wall Street Journal analyst told Deadline about AMC Theaters:


“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.”


Clearly, they will lose more money with their lights on than off, but they have said that they are intending to keep them on, even after so many delays happening recently. This was not the decision taken by Cineworld, the parent company of Regal Cinemas, which most recently closed all of their venues across the U.S. and the U.K.