It was clear back in February that the Coronavirus was going to have an impact on cinema in 2020. You only had to look to China, where cinemas were closed down for fear of spreading infection, to get a taste of what was coming down the line. Some assumed that spring 2020 films would merely see a reduced box office as people stayed away from crowded places. Then, as the situation got worse, it became apparent that lockdowns were coming. As such, two weeks ago, AMC Theaters announced that they were closing all of their US theaters for the next 6-12 weeks.
With the pandemic showing no signs of abating anytime soon, business analysts now think it’s unlikely the chain will ever open its doors again. AMC, the largest domestic theater chain was already in trouble before Coronavirus, reporting a $5 billion-plus deficit at the end of 2019 and losses of $149 million for the year. But now, with their doors shuttered for the foreseeable future and no money coming in whatsoever, S&P Global has downgraded AMC’s credit rating from ‘B’ (Highly speculative) to ‘CCC’ (Default imminent, with little prospect for recovery).
S&P Global justified the downgrade by saying:
“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 sadly, any chances of recovery look slim, according to the firm:
“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. 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.”
Well, with there being no end in sight to the pandemic and no guarantee of box office revenue returning to pre-2020 levels, I think the writing is on the wall for AMC Theaters. The chain shutting down would certainly be a major blow to the domestic film industry though, not to mention its thousands of staff, so here’s hoping someone comes in to save it.
