(WTVO) — Analysts say AMC theaters may be forced to close for good as a result of the coronavirus pandemic, as S&P Global downgraded the company’s credit rating to “Default imminent, with little prospect for recovery” last week.
The nation’s largest theater chain had been forced to close as part of a response to the coronavirus pandemic. The company, was already facing a deficit of more than $5 billion at the end of 2019.
“While there is a high degree of uncertainty about the rate of the coronavirus’ spread and when the pandemic will peak, some government authorities estimate that the peak will occur between June and August,” S&P analysts wrote in a note on Thursday.
“We expect AMC Entertainment Holdings Inc.’s (AMC) theaters will remain closed beyond June due to the impact of the global coronavirus pandemic. We do not believe AMC has sufficient sources of liquidity to cover its expected negative cash flows past mid-summer, and we believe the company will likely breach its 6x net senior secured leverage covenant when tested on Sept. 30, 2020, absent a waiver from its lenders.”
AMC also furloughed about 600 employees last week, including it’s CEO, according to The Wrap.
“While unlikely, we could raise the rating if AMC were able to secure additional liquidity without further burdening its capital structure and if we expected the company would be able to generate substantial cash flow in 2021,” they continued. “This would likely require conclusive knowledge about the length of the theater closures and a view that the box office would return to normalized levels in 2021.”
Hollywood has been responding to the COVID-19 outbreak by releasing some movies, like “The Invisible Man” and “Birds of Prey,” to video streaming services early, and pushing other major releases, such as the James Bond film “No Time to Die” and the horror sequel “A Quiet Place: Part II,” back to late 2020 dates.