Home Entertainment The world’s largest cinema chain AMC Theatres might be on the verge of declaring bankruptcy

The world’s largest cinema chain AMC Theatres might be on the verge of declaring bankruptcy

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After months of wall-to-wall reports on how the COVID-19 pandemic is affecting the entertainment industry, it should come as no surprise that businesses are suffering and that few will emerge unscathed.

Already under pressure thanks to competition from streaming services and dwindling audience numbers, cinemas have been struggling for years and being forced to completely cease operations for months due to the pandemic might be the straw that breaks the camel’s back if AMC Entertainment Holdings Inc.’s recent SEC filing is anything to go by.

The world’s largest cinema chain, which operates nearly 1,000 theaters across the world, could be on the verge of declaring bankruptcy. The company is unsurprisingly experiencing severe cash-flow and liquidity issues due to the operating restrictions imposed on it as a result of COVID-19 pandemic.

In a new SEC filing (which you can read here if numbers make you happy) ahead of its quarterly investors call in a few days, the company expressed doubts as to its ability to continue as a going concern while disclosing that it anticipates a loss of between $2.1 and $2.4 billion for the first quarter of this year. This stands in stark contrast to its declared loss of $130 million during the same period in 2019, and is driven largely by an impairment of between $1.8 and $2.1 billion in the company’s long-term assets, intangible assets, and goodwill. In case you’re wondering that’s mainly physical locations which may close down, things like its estimated brand value, and customer brand loyalty – among many others. As stated in the filing:

“We may not be able to obtain additional liquidity and any relief provided by lenders, governmental agencies, and business partners may not be adequate and may include onerous terms. Due to these factors, substantial doubt exists about our ability to continue as a going concern for a reasonable period of time.”

However even should the company receive a much-needed cash injection at favourable-enough terms in order to resume operations as lockdown restrictions are slowly eased, that doesn’t mean its cash flow will improve – and subsequently its ability to service the newly-incurred debt – as there’s no guarantee audiences will flock to the cinema, nor will they be able to fill their cinemas due to social distancing requirements, and they will incur additional operating expenses due to new health requirements.

“If we do not respond appropriately to the pandemic, or if customers do not perceive our response to be adequate, we could suffer damage to our reputation, which could significantly adversely affect our business.”

The company also listed a number of other risk factors outside of their control that could severely impact their operations, such as a lack of control over film distributors, alternate methods of film distribution, and the general climate of uncertainty surrounding the industry.

It will be a sad day should this come to pass, because we can reasonably expect many other cinema chains across the world to be in the same predicament. As much as we like to complain about going to the cinema with its pricy concessions and having to deal with obnoxious audience members, there’s still something magical about seeing a movie on a big screen and having a great shared experience – and it’s not something I’d like to lose.

Last Updated: June 4, 2020

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