- AMC Theaters may file for bankruptcy on account of the coronavirus.
- AMC Theaters have been closed since mid-March and may remain closed well into June.
- Visit BGR’s homepage for more stories.
The impact of the coronavirus on the U.S. economy has been nothing short of disastrous. Most businesses have been forced to close up shop and millions of people across the country have been left unable to earn a paycheck. In turn, it’s not surprising that unemployment figures in the U.S. have reached levels we’ve never seen before. Consider this: over the course of three weeks — from late March through early April — an estimated 17 million Americans filed for unemployment. To put that figure into context, that represents 10% of the U.S. workforce.
While some businesses — like restaurants, for instance — have been able to remain open and generate cash via takeout and delivery orders, others have been permanently closed for weeks. Movie theater chains in particular have been hit extremely hard by the coronavirus. With that said, it’s perhaps no surprise that AMC Entertainment — which is the largest movie chain in the country — is actively exploring filing for Chapter 11 bankruptcy.
Word of AMC potentially filing for bankruptcy first surfaced last week, and now reports are indicating that the theater chain is actively in talks to hire the bankruptcy law firm Weil Gotshal. The New York Post reports:
Weil Gotshal’s team is headed up by star lawyer Ray Schrock, who lately has worked as bankruptcy counsel to California utility PG&E, the Fairway supermarket chain and retail icon Sears Holdings, many of whose stores got taken over by billionaire Eddie Lampert.
The insider cautioned that “it’s early stages” and that it’s not clear whether the theater chain has hired any other advisors for the possible restructuring. Nevertheless, a bankruptcy filing looks increasingly likely as the company has already begun to skip rent across its locations, according to the source.
“You don’t hire Ray unless you are filing,” the source said. “You are not going to hire them at their hourly rate to have a beer with them.”
At this point, with malls and theaters closed, AMC has no cash flow and has reportedly told some landlords it will be unable pay rent. Compounding matters is that AMC already has a staggering amount of existing debt. While Chapter 11 bankruptcy won’t necessarily see AMC go out of business, don’t be surprised to see a good number of AMC theaters close up shop as part of the restructuring process. As it stands, there are approximately 1,000 AMC theaters across the country.
AMC announced it was closing all of its theaters on March 17 for up to 12 weeks, which is to say that theaters will re-open by mid-June in a best-case scenario. The reality, however, is that even if the number of coronavirus cases dwindles by the time summer rolls around, there’s no telling if the public at large will feel comfortable packing into crowded theaters so quickly. What’s more, many movies that were slated to open in March and April have been pushed back to July and beyond. In other words, if AMC theaters re-open in June, the selection of movies may not even be able to entice people out to the theaters in the first place. The Top Gun sequel, for instance, was set to be released in June of this year but will now arrive in December.