AMC Theatres, one of the worlds largest move theatre chains, announced Tuesday that it’s existing cash resources would be “largely depleted” by the end of 2020 or early 2021 because of the “reduced movie slate for the fourth quarter,” as well as “the absence of significant increases in attendance from current levels.
As a result of the news release, AMC’s shares closed down 6% on Tuesday.
The company provided two possible solutions to the dire problem, customers start buying tickets (unlikely until a vaccine is released) or they borrow more money.
Perhaps the scariest remark from the company was this:
“Boosting liquidity won’t be easy without a return to business-as-usual. It’s exploring additional debt financing, renegotiations with landlords, and even potential sales of assets. But AMC threw cold water on those options. “There is a significant risk that these potential sources of liquidity will not be realized or that they will be insufficient to generate the material amounts of additional liquidity that would be required until the company is able to achieve more normalized levels of operating revenues,” AMC said.”
In summary, additional debt financing would not generate a material amount of liquidity for AMC. This is very concerning, as nobody is going to want to lend money to AMC at such a low rate of interest with such a high chance of potential bankruptcy.
It’s likely that AMC will want to explore equity financing, but the existing share holder base will not like the idea of dilution.
Halloween may still be 3 weeks away, but for AMC the nightmare has just begun.
Works Cited:
https://www.cnn.com/2020/10/13/media/amc-theatres-money-movies/index.html