AMC Theatres, the world’s largest movie theater chain, said it could run out of money by year’s end or early 2021, an ominous sign for retail real estate occupied by cinemas hurt by restrictions in the pandemic as well as surrounding businesses.
It's the latest alarm bell rung by AMC, with more than 550 U.S. locations. It has said since June its financial state will be shaky until major studios resume releasing films on a regular basis and consumers grow comfortable with going back into theaters.
“Given the reduced movie slate for the fourth quarter, in the absence of significant increases in attendance from current levels or incremental sources of liquidity, at the existing cash burn rate, the company anticipates that existing cash resources would be largely depleted by the end of 2020 or early 2021,” AMC said in a Tuesday federal regulatory filing.
The company said it will otherwise require additional resources of liquidity or increases in attendance levels to meet its obligations as they become due. The company does not state specific monetary amounts of added liquidity required, only that they are “expected to be material.”
AMC did not immediately respond to CoStar News’ request for comment.
The trade group National Association of Theatre Owners has projected that at the pace of current revenue declines, 69% of small and mid-sized U.S. cinema chains could soon be forced to file for bankruptcy or shut down permanently.
Rival Regal Cinemas, the nation’s second largest chain, announced last week it was closing all of its 536 U.S. theaters until it sees a steady return of new Hollywood movies to its venues.
Also, officials of the family-run B&B Theatres, the nation’s sixth-largest chain, said last week the company faces potential bankruptcy within a few months without new film content or government financial aid.
The situation has implications not only for theater owners but also hundreds of retail property owners nationwide that depend on theaters to provide a large part of their non-shopping customer traffic.
AMC, which is already highly leveraged, is considering several options, including taking on more debt, renegotiating lease payments with landlords, selling theaters or other assets, and exploring equity financing and joint-venture arrangements, according to the filing.
The company in August reported a $561 million quarterly loss, though it has continued to open theaters nationwide at reduced capacities and with other restrictions that differ by jurisdiction.
AMC more recently reported that 80% of its U.S. theaters are now open, but theaters have yet to reopen in the two biggest movie markets, New York City and Los Angeles.
The filing by the Leawood, Kansas-based theater chain followed a warning earlier this month by financial ratings firm S&P Global, predicting that the movie chain would run out of liquidity within the next six months as it lowered AMC’s credit rating.
“The ongoing coronavirus pandemic will continue to have an impact on theater attendance and consumer behavior into 2021,” S&P Global analysts said in a report.
According to the entertainment news site Variety, the latest weekly survey by consulting firm Morning Consult found that just 23% of 2,200 U.S. adults polled feel “very comfortable” or “somewhat comfortable” going to the movies, and the figure has never risen above 24% since the survey was launched in late April.
To combat unpredictable film release schedules and public health concerns, analyst Robert Fishman of financial services firm MoffettNathanson suggested in a report last week that movie theater companies buy movies from Amazon, Netflix and other streaming entertainment providers “as a lifeline to get more product on movie screens.”
The analyst projected that the 2020 domestic U.S. theater box office tally would drop 81% from a year earlier, to $2.1 billion. In normal years prior to the pandemic, that total remained around $11 billion.
AMC has already made arrangements with producer Universal Studios to share certain distribution costs in exchange for AMC getting a share of Universal’s future streaming platform revenues, and analysts have suggested there could be more blurring of lines between content producers and exhibitors.
The major production companies, which now include tech giants such as Amazon, Netflix and Apple that are increasing their demand for studio space geared to their streaming content output, have presented the biggest challenge to the movie theater business model since before the pandemic.
Amazon earlier this year was reportedly in talks to acquire AMC Theatres, and Netflix recently purchased a vintage movie theater in Los Angeles.
Major studios could also try to own movie theaters after a federal court recently rescinded 1940s-era regulations that severely restricted studio ownership of theater chains.