15 Oct 2020: AMC Theaters could run out of cash by 2020-end
The traditional theater scene is not looking good.
AMC authorities recently declared in a public filing that their cash reserves may be depleted by this year or next, if people don't return to theaters in large numbers.
Details: The statement by AMC authorities portray a grim picture
"Given the reduced movie slate for the fourth quarter, in the absence of significant increases in attendance from current levels or incremental sources of liquidity, at the existing cash burn rate, the Company anticipates that existing cash resources would be largely depleted by the end of 2020 or early 2021," read the statement.
It added that either increase in attendance or liquidity is needed.
Statistics: 17% AMC theaters had generated 23% of revenue in 2019
Notably, AMC theaters have reopened over 80% of their US cinemas but release delays of potential blockbusters are worsening the business.
Theaters in California, New York, North Carolina, Washington and Maryland, which generated 23% of their 2019 revenue, remain closed as of now.
The company in its regulatory filing reported an 85% drop in same-theater attendance in this month, as compared to last year.
Liquidity goals: Options: Selling off theaters, getting into joint ventures, renegotiating terms
Thus, they need more money and the possibilities before AMC to get the same are by selling off theaters, getting into joint ventures, renegotiating lease agreements with landlords, getting more debt or trying equity financing.
The report also clarified that "unknown magnitude and duration of COVID-19 pandemic" has reduced accuracy levels of their predictions in terms of future attendance, cash burns and liquidity requirements.
Mounting debt: Drop in credit rating too; this is what it means
Meanwhile, credit ratings agency S&P Global reduced AMC's rating to 'CCC-' in early-October and predicted that the theater chain (the largest in the world) will exhaust its liquid assets in the coming six months.
In credit rating parlance, a 'CCC-' rating means the said company is bound to default, exchange or get into financial redemption in six months unless there's a drastic circumstantial improvement.