Things continue to look bad for AMC Theatres. The largest theater chain in the country had to close its doors in mid-March, given the current situation the world finds itself in. But with the company loaded down with debut and bleeding cash during the closure, Wall Street analysts are predicting that AMC will need to file for bankruptcy. If that does happen, this could be the end to a major staple of the moviegoing industry.

Both MKM Partners analyst Eric Handler and Loop Capital analyst Alan Gould downgraded their ratings on AMC's shares, saying that those who hold the stock currently should sell. The company's stock was valued at nearly $6 per share at the beginning of the year and recently slipped under $3 per share. Handler had this to say.

"Based on our view that theaters 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. Further fueling our liquidity concerns is AMC's decision to stop paying rents to landlords effective April."

As we recently reported, the company's credit rating was lowered, which made its prospects for long term recovery look bleak. This serves as yet another devastating blow. This all seems rather grim, but it's hard to argue against the numbers. Even before the shutdown, AMC had amassed a great deal of debut. The theater chain is $4.9 billion in debt and is valued at less than $330 million. Alan Gould agreed on the possibility of bankruptcy. But for Gould, the problem is that AMC will, at the very least, need additional financing to stay afloat, which will be problematic for shareholders.

"We think bankruptcy is a distinct possibility, and at a minimum, the company will require a highly-dilutive financing."

AMC reportedly had $265 million of cash on hand at the end of last year, with an additional $332 million available on its credit lines. They will also have access to certain government bailout funds. It's estimated that, even after cutting costs across the board as much as possible, its operating costs sit at $155 million per month. That would mean a shutdown until August would be nearly impossible to weather. AMC CEO Adam Aron recently indicated that he hoped they could reopen by June, but that seems increasingly unlikely, as most studios have delayed upcoming releases until at least July, if not much later.

Other theater chains are likely also going to have issues staying afloat during the shutdown. The other issue is whether or not people will return to theaters like the used to once the social distancing orders are lifted. If AMC, or other theater chains, fold and people don't start going to the movies again once some semblance of normalcy returns, it could be a massive blow to the industry as a whole. It seems things are poised to get worse before they get better. We'll be sure to keep you posted as the situation develops. This news comes to usu via The Hollywood Reporter.

Ryan Scott at Movieweb
Ryan Scott