Another day, another bit of very bad news for the movie business. AMC Theatres, the largest theater chain in the U.S., is now expected to run out of money within six months. Even though the chain has been able to reopen many of its locations in recent weeks to coincide with the releases of The New Mutants and Tenet, its financial outlook is dire and, barring a radical change, default is expected.
The information comes from S&P Global, who recently reduced its credit rating for AMC Entertainment. AMC has been restructuring its debt to avoid bankruptcy and attempting to raise cash to stay afloat. Even so, S&P believes that the rate at which the company is burning through cash is untenable. Here's what they had to say.
"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."
AMC is saddled with tremendous debt, said to be in the $5 billion range. As such, raising more capital, especially when the outlook of the business isn't particularly great, does feel unlikely. Without a cash infusion or additional restructuring, the money will dry up. Tenet failed to deliver at the box office which forced other major blockbusters like Black Widow to push well into 2021. Theaters rely on these big movies to put meat in seats. As such, it is not expected that movie theater attendance will improve much before the end of the year. There does not seem to be much hope for AMC, as it stands.
Given the level of attendance currently, it is expected that many movie theaters are losing money by being open. Amazingly, AMC may actually be losing more money by having its locations open right now. That illustrates the truly bleak situation the exhibition side of the movie business finds itself in right now. S&P, further, expresses that their negative outlook is based on their view that default is all but inevitable.
"The negative outlook reflects our view that a default, distressed exchange, or redemption appears to be inevitable within six months, absent unanticipated significantly favorable changes in the issuer's circumstances."
While other chains like Cinemark and Regal are certainly not thriving right now they don't seem to be in as much trouble, at least not so immediately. Amid AMC's ongoing financial troubles there were rumors earlier this year that Amazon was possibly looking to buy the chain. Though the rumors dried up rather quickly.
Many prominent filmmakers, along with the National Association of Theatre Owners, the Directors Guild of America and the Motion Picture Association are currently lobbying Congress to provide financial assistance to movie theaters. There is a growing sense that movie theaters as we know them may not survive without some sort of help from the government. This news comes to us via The Hollywood Reporter.