AMC warns bankruptcy is on the table as cash runs low

A medical worker wearing a mask walks near the AMC movie theater in Times Square amid the coronavirus pandemic on May 7, 2020 in New York City.

Alexi Rosenfeld | Getty Images

AMC has agreed to sell as many as 15 million shares of its stock, but equity in the company could soon be worthless if the largest theater chain in the world files for bankruptcy.

On Tuesday, AMC continued to warn investors about its dwindling cash pile and said it may have to file for Chapter 11 bankruptcy if it is unable to secure additional sources of liquidity.

Shares of the company tumbled more than 11% on the news. AMC’s stock, which has a market value of around $387 million, has plunged 56% so far this year.

Chapter 11 bankruptcy would likely allow AMC to stay in business while it reworks its debts and sorts out new lines of liquidity.

Movie theater chains in the U.S. have been slammed by the ongoing coronavirus pandemic, which first shuttered theaters and then drove away customers and major Hollywood blockbusters.

AMC was particularly vulnerable because of the more than $4.75 billion in debt it had amassed before the crisis from outfitting its theaters with luxury seating and from buying competitors such as Carmike and Odeon. AMC has around 1,000 theaters and more than 11,000 screens globally.

“We will require significant amounts of additional liquidity and there is substantial doubt about our ability to continue as a going concern for a reasonable period of time; holders of our Class A common stock could suffer a total loss of their investment,” the company wrote in the SEC filing.

While New York Gov. Andrew Cuomo gave movie theaters hope over the weekend when he announced that theaters outside of New York City could reopen. Studios had told movie theater operators that they would withhold major releases if New York remained closed.

Also on Tuesday, AMC released a preliminary earnings report. The company said it had earned around $119.5 million in revenue during the three-month period ended Sept. 30. That’s a steep fall from the $1.32 billion AMC tallied during the same period last year.

For the first nine months of 2020 AMC took in revenue of $1.08 billion, a fraction of the $4.02 billion it garnered during the same period last year.

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