Coronavirus is affecting our health in ways that could be fatal, but the disease is also likely to be the death of many of our favorite businesses.
According to The Wrap, AMC movie theaters are in serious danger of never reopening after the S&P Global downgraded the company’s credit rating to CCC- from B which means “Highly speculative” to “Default imminent, with little prospect for recovery” in credit terms. Unlike restaurants, there is no “take-out only” for theaters. AMC has been forced to close every single theater and studios have either moved their movies to later in the year or taken them off the 2020 schedule all together.
“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 was already in bad financial shape as they reported over $5 billion in deficit at the end of 2019 and losses of $149 million. 600 employees were furloughed last week including the CEO Adam Aron.
AMC is the largest chain of theaters in America. If they were to close it could spell the end of “going to the movies” for quite some time.