For years the Chinese owned AMC Theaters has been the largest movie theater chain in the United States with over 660 theaters in the states. However, all of those theaters are in serious trouble as AMC is quickly losing money during the coronavirus outbreaks which has closed all of their screens.
S&P Global downgraded AMC Theaters’ credit rating last week to a CCC- and many business insiders believe the company is heading for a default on their debt. Insiders believe that the theater chain could run out of money by summer and be forced to close down for good.
Others believe that AMC could file for Chapter 11 bankruptcy in the near future which could work in the brands’ favor since AMC is saddled with a $4.9 billion debt and is currently valued at $327.3 million.
AMC sent out the following to their landlords detailing that they were ceasing to pay rent effective this month:
“This letter is to formally advise you that AMC temporarily suspended operation of all of its theatres in the United States (including the theatre referenced above) on March 17, 2020 in response to circumstances beyond AMC’s control and specifically the COVID-19 pandemic and the national state of emergency declared by the President of the United States on March 13, 2020, and in compliance with various federal, state and local government mandates and directives (including those that now limit public gatherings to no more than 10 people and emphasize social distancing).
All other major theatre operators in the United States have also closed their theatres. As the crisis unfolded and movie studios pulled major new releases (significantly reducing film product), AMC took steps to adapt and remain open. AMC proactively reduced capacity by 50% per the initial CDC guidelines, and then to 50 persons per auditorium per revised CDC. Some of the steps AMC has implemented are: (a) making the very difficult decision to furlough over 25,000 employees in the United States, (b) instituting a reduced pay program for theatre General Managers, (c) placing a hold on discretionary capital expenditures, and (d) making significant cost and personnel cuts at AMC’s corporate offices.
The final step AMC is currently taking directly impacts you. Without revenue from its theatres, AMC will cease paying rent and charges under the lease effective as of April, 2020.
AMC asks for your patience and understanding during this difficult time. AMC intends to reopen its theatres as soon as possible after it is safe to do so. AMC looks forward to getting back to business as usual.
AMC intends to advocate at the federal level for appropriate relief for the theatre exhibition and real estate industries. AMC is willing to discuss with you any suggestions you may have for getting through this crisis and planning for when AMC can reopen and pay rent.”
AMC is hoping to reopen in May but that depends on if government sanctions will allow them to do so.