The world’s biggest chain of theaters - AMC Entertainment Holdings Inc AMC is mulling options for respite from debt, that includes potential bankruptcy, reports Bloomberg.
The cinema chain is still reeling from the aftermath of the pandemic outbreak and lockdown measures, which has kept movie-goers out of cinema halls.
What Happened: The company disclosed in a filing with the U.S. Securities and Exchange Commission on Tuesday that it could face a liquidity crunch by the end of this year or sometime early next year.
AMC has resumed operations in 83% of the 598 theater properties, albeit with a 20% to 40% capacity. However, footfalls are approximately 85% lower compared to the same period in 2019.
AMC lenders are holding preliminary talks among themselves and considering a cash infusion to keep the business afloat if the company decides to file for bankruptcy, according to Bloomberg.
Other alternatives to filing for Chapter 11 are raising funds through equity or debt offering, entering into joint ventures, sale of assets and revisiting long-term lease agreements.
At present, 104 theaters in the U.S are yet to reopen. These units represent 17% of AMC's properties in the U.S. and have contributed 23% to the domestic revenues in 2019.
Why Does It Matter: Movie theaters are facing multi-pronged setbacks as the lockdown measures have forced movie-goers to stay home and tune into the closest alternative -- online streaming platforms.
On the other hand, the federal guidelines have imposed restrictions on the number of attendees in a cinema hall, which directly impacts daily cash collections.
Major movie studios have also shifted big ticket movies to 2021 or are experimenting with releasing movies directly on streaming platforms. This has led to Cineworld Group PLC CNWGY-owned Regal Cinemas suspend its U.S. operations.
Price Action: AMC shares closed 13.24% lower to $3.54 on Tuesday and are down 6.28% in the after-hours session at press time.
Related Movie Theater Stocks: Cinemark Holdings, Inc. CNK, Marcus Corp MCS, IMAX Corp IMAX and Reading International, Inc. RDI
Related Streaming Platform Stocks: Netflix Inc NFLX, Amazon.com Inc. AMZN, Apple Inc. AAPL and Walt Disney Co DIS
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