AMC close to bankruptcy as coronavirus puts movies on pause

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AMC Theatres is on the brink of bankruptcy as coronavirus puts movies on pause.

The cinema giant, which brought in a total revenue just over $1.4 billion in the fourth quarter last year, announced in mid-March that it would close its doors nationwide for between six to 12 weeks in compliance with federal directives to help stop the spread of COVID-19.

The Centers for Disease Control and Prevention has urged U.S. residents to stay home as much as possible and keep a social distance of at least 6 feet if they must go outdoors.

“Without a doubt, major disruptions will hit the movie theater business,” Chris Fenton, a film producer and author of “Feeding the Dragon,” told FOX Business. However, he said, “AMC is facing an even worse problem.”

The chain, in which Chinese conglomerate Dalian Wanda Group owns a majority voting stake, has been looking for ways to cut costs due to the crisis. In late March, it furloughed all of its 600 corporate employees, including Chief Executive Officer Adam Aron.

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Wall Street analysts now say an AMC Chapter 11 bankruptcy filing is increasingly likely.

In a recent report, MKM Partners analyst Eric Handler downgraded his rating on shares from “neutral” to “sell,” according to The Hollywood Reporter. That move came after Loop Capital analyst Alan Gould's Wednesday downgrade to “sell,” saying “bankruptcy is a distinct possibility, and at a minimum, the company will require a highly-dilutive financing.”

The theater reportedly hired law firm Gibson Dunn & Crutcher to advise on a possible restructure and has also gestured it’s ready to negotiate breaks on rent.

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But AMC isn’t the only chain having problems.

Since March, the New York Post reported, nearly all of the United States’ 40,000 screens have gone dark. Blockbusters like Marvel’s “Black Widow,” Universal Pictures’ “Fast & Furious 9” and the latest James Bond flick, “No Time to Die,” have all been postponed.

Ticker	Security	Last	Change	Change %
AMC	AMC ENTERTAINMENT	5.04	+0.09	+1.82%

The National Association of Theatre Owners, a trade group that represents 33,000 screens in all 50 states, said last month that it asked the government for help to support its 150,000 employees with loan guarantees, tax benefits for employees and funds to offset lost sales.

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Even if a bailout does come, it may be too little for AMC, according to Handler. He wrote that the “weight of its balance sheet will make for tough sledding given the company's high leverage, thus making a reorganization inevitable.” Fenton doesn’t think AMC will get one.

He also said the theater landscape will look much different when the pandemic ends. While no one knows for sure the coming impact, he said that the theater-going habit for consumers was already fragile pre-crisis. This crisis will further exacerbate that issue and studios are already prepping for it by shortening theatrical windows.

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“The strongest will survive,” he added. “Some may be acquired by major streaming platforms or studios. A majority may be limited to the biggest films with communal draw.”

AMC did not immediately respond to a request for comment from FOX Business, but Aron said in a statement that while “we are ever so disappointed for our moviegoing guests and for our employee teams … the health and wellbeing of AMC guests and employees, and of all Americans, takes precedence above all else. We will continue to monitor this situation closely and look forward to the day we can again delight moviegoers nationwide by reopening AMC movie theatres in accordance with guidance from the CDC.”

The theater’s stock has dropped 60 percent in the last three months.

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