Even after accepting a debt plan that would extend the life of AMC Theatres into 2021, the chain is in danger of running out of liquid assets in the first quarter of next year, a new report states. The chain, which was already in rough shape before locations had to be shuttered to combat the Covid-19 pandemic, has been leading the charge to reopen theaters and to try and pressure movie studios to get as many films as possible on the big screen. Now, according to The Hollywood Reporter, things are looking bleak for AMC's prospects beyond 2021's reopening.
"Given our expectations for a high rate of cash burn, we believe the company will run out of liquidity within the next six months unless it is able to raise additional capital, which we view as unlikely, or attendance levels materially improve," S&P Global said, reducing AMC's credit rating.
The pandemic has hit AMC hard: the chain has been sued by landlords who say some locations have not been paying rent during the closure, and last estimates were that AMC Theatres had laid off 98.5% of its employees in a closure that may now last as long as four months (some early, optimistic projections had held the theatres might be able to open after six weeks of downtime). The company's credit rating was downgraded at the start of this month, with some analysts predicting that AMC would not reopen at all, but more recently reports came out that the chain was talking with bankruptcy lawyers and working on a path forward that would allow the company to continue operations in spite of the hit it's taking right now.
The company, which is already deep in debt, will likely face serious financial problems in the fall, unless creditors can grant AMC a waiver. AMC's creditors may be more likely than usual to grant such a waiver -- after all, the COVID-19 impact has hit virtually everyone. Still, it seems likely that AMC will face an uphill battle in recovering from the losses. Last year at this time, the domestic box office was generating more than $100 million in revenue per week. Now, it's a few thousand dollars from the handful of places where theaters (mostly drive-ins) are still open.
Even while theaters were taking in huge amounts of money in 2019 -- a record year for the box office -- AMC was running a deficit. According to earnings statements, the country's largest theater chain lost more than $100 million last year. The company reported a $5 billion-plus deficit at the end of 2019 and losses of $149 million for the year -- numbers that aren't likely to bounce back this year. In 2018, they were profitable -- but by less money (around $110 million) than last year's deficit.