AMC THEATERS LIKELY TO FILE FOR BANKRUPTCY AMID COVID-19 OUTBREAK

AMC is likely to file for bankruptcy after closing all of its theatres due to the coronavirus outbreak, according to Wall Street analysts. MKM Partners analyst Eric Handler downgraded AMC Theatres stock from “neutral” to “sell.” “Based on our view that theatres will be closed until at least August and our belief that AMC lacks the liquidity to stay afloat until that time, we expect the company will soon be faced with filing for bankruptcy,” he said.

Shares of AMC Entertainment Holdings were down more than 4% in trading on Thursday. As of 31 December 2019, the company reported $265 million in cash and $332 million available via lines of credit. Handler predicted that even if AMC obtains government bailout funds, the company’s $4.75 billion in debt, losses of $149 million, and high leverage ratio will make it difficult for the company to remain afloat. “AMC is the exhibition company we view with the least financial flexibility,” Handler wrote in his report. “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.”

The prediction came about after a research note was released on 8 April by Loop Capital’s Alan Gould stated that there was a “distinct possibility” of bankruptcy and added that the theater chain might need highly dilutive financing at minimum to survive. But, the pandemic isn't the only factor to blame for the losses. "Even if you sell out every seat in the house, you’re still gonna lose money with that much debt,” Chairman of Wilk Auslander’s Bankruptcy Departments, Eric Snyder said. “Bankruptcy is likely, but it’s not necessarily related to the pandemic. With so much competition from streaming there’s no way they can pay that off.”

The wall Street Journal reported that AMC’s lenders sought lawyers from law firm Gibson, Dunn & Crutcher LLP to advise on restructuring. To cut costs during the closure of theatres as a result of the COVID-19 crisis, AMC has placed more than 24,000 employees, 600 of them being corporate employees, including CEO Adam Aron on a leave of absence. The company also informed its landlords that it won’t pay rent starting in April, throughout the closing period. The deferral of the monthly payments would be “essentially double the number of months that AMC could survive without any revenue and without any liquidity event,” B. Riley FBR senior analyst Eric Wold wrote in a note Wednesday. The company also may be able to obtain working capital assistance from vendors, including via a set amount of payments due to the studios, which “has the potential to increase this safety net even further,” Wold added.