Days after the entertainment industry joined cinemas in asking Congress to rescue exhibition, ratings agency S&P downgraded debt of the world’s biggest chain, AMC Entertainment, calculating it has six month of cash left unless things materially improve.
The stock mostly shrugged off the news, down 0.4% to $4.63. But that’s half of where it was trading a year ago as exhibition has been the entertainment sector hardest hit by COVID-19, aside from theme parks.
AMC and other chains had shuttered all locations in March. The company announced plans Thursday to resume operations at 14 theaters in Michigan and California — bringing the total of its U.S. locations open to more than 80%.
S&P said AMC continues to struggle operationally and financially because U.S. attendance remains weak after reopening and as additional major theatrical releases are delayed. It noted the company’s “cash burn” — rate of spending — will accelerate now that theaters are open.
“Given our expectations for a high rate of cash burn, we believe the company will run out of liquidity within the next six months unless it is able to raise additional capital, which we view as unlikely, or attendance levels materially improve,” it sad in a report where it lowered its issuer credit rating on AMC to ‘CCC-‘ from ‘CCC+’ — reflecting its view that “a default, distressed exchange, or redemption appears to be inevitable within six months, absent unanticipated significantly favorable changes in the issuer’s circumstances.”
On Wednesday, dozens of established filmmakers joined with the Directors Guild of America, the National Association of Theatre Owners and the Motion Picture Association to urge Congress to come to the aid of movie theaters devastated by the pandemic. “Absent a solution designed for their circumstances, theaters may not survive the impact of the pandemic,” they warned in a letter to leaders on Capitol Hill.
Theaters have opened in most states but not in the two biggest movie markets, New York and Los Angeles. Attendance has been thin, in part because studios continue to postpone the big releases cinemas count on the draw audiences.