World’s Largest Movie Chain May Shut Down Because Of COVID-19

AMC, which operates the largest chain of movie theaters in the world, may be forced to close down because of COVID-19 exposed problems with debt and financial insolvency as CNBC reports.

The world’s largest movie theater chain said Wednesday it has “substantial doubt” it can remain in business after shuttering all of its locations during the coronavirus pandemic.

In April, AMC Theaters said a new debt offering would allow the company to withstand these closures until a partial reopening ahead of Thanksgiving. However, in a filing with the Securities and Exchange Commission the company disclosed concerns about liquidity, its ability to generate revenue and the timeline of reopening its theaters.

In that filing, AMC released preliminary earnings results. The theater chain expects to have lost $2.1 billion to $2.4 billion in the first quarter ended March 31. It will release its earnings on Tuesday.

AMC also revealed that its revenue had fallen to $941.5 million, a nearly 22% drop from the $1.2 billion it garnered in the same quarter last year. The second quarter is expected to be even worse.

“We are generating effectively no revenue,” the company said in its filing.

As of April 30, the company said that it had a cash balance of $718.3 million.

Despite the announcement, AMC’s stock was trading higher Wednesday, recently up nearly 5%, likely the result of the company restructuring its debt, Wedbush analyst Michael Pachter said.

“Even though the rate is much higher (12% vs. an average of around 6%), it provides liquidity and buys them some time,” he said.

AMC had previously sought to conserve cash by furloughing its in-theater employees, halting its operations through June and suspending its dividend payments and share repurchases. The company also has been working with landlords to defer rent payments and has cut the salaries of its corporate level employees.

However, as it seeks to reopen its theaters this summer, it has had to ramp up its cash spending. While AMC believes it has enough of a cash reserve to resume operations this summer, or perhaps a little later, its liquidity after that point remains in question. (source)

The theater itself is not dead. Rather, it is going through an evolution.

A lot of movies right now are moving to streaming. Think about it- why pay money to sit in a room with a bunch of people one does not trust to watch a movie and have to pay a lot of food, let alone a lack of privacy plus nasty theater bathrooms?

Watching movies at home eliminates all of these problems. It is only natural that if the theater experience minus the expenses and gross things can be done, that it would be natural progression.

Likewise, people will still go to theaters, but they will be likely larger and more social events. Think a possible future of a drive-in type experience with maybe some more social interaction, like a glorified party but with more things to do and more order.

Movies are for many people a staple of American entertainment and social life, as they are highly influential on culture. The seeming decline of one form does not mean an end, but a transition with the times, for while times change and means as well, the nature of man does not.

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