The coronavirus pandemic has had a devastating impact on a number of industries -- restaurants, hotels, and retail. But entertainment has also suffered -- specifically, movie theaters. In fact, AMC Entertainment (NYSE: AMC), the country's largest movie theater chain, has been barely hanging on for months.
In October, the company's management team warned that AMC could be forced to declare bankruptcy by early 2021 if it couldn't secure additional funding to stay operational. And in December, its own lenders urged it to file for bankruptcy protection.
But AMC persisted, and now, its latest securities filing reveals that it has just enough cash to keep going in the near term. In other words, AMC has managed to avoid bankruptcy yet again. But that doesn't mean investors are out of the woods.
Scrounging up cash in a crunch
AMC's latest filing reveals that it has found enough money to keep running through July 2021, even if movie theater sales don't pick up. And if sales do pick up, the company has enough cash to stay afloat through the end of the year.
In mid-December, AMC's chief executive, Adam Aron, said that the company needed to raise $750 million to keep going. By early January, it had already eked out $204 million. And on Jan. 25, the company announced it had secured an additional $713 million, bringing its total up to $917 million and avoiding bankruptcy in the process.
The company's latest cash infusion came in part from Odeon, its European chain. AMC was able to refinance an existing line of Odeon credit to round up $411 million.
As of the end of 2020, AMC had about $308 million in cash, but at a monthly average cash burn rate of $124 million in October, November, and December, that wasn't going to go very far. Right now, 438 of the company's 593 U.S. theaters are open, but at limited capacity, while 86 of its 360 overseas theaters are open as well.
But operating restrictions aren't the only issue AMC is facing right now. Hollywood production has all but stalled in the course of the pandemic, and AMC, like other theater chains, has sorely been lacking content to offer. Throw in the fact that Warner Bros. recently announced it will be streaming new releases, and it's hard to imagine how AMC -- or any other theater chain, for that matter -- will survive.
Will a vaccine rollout keep AMC afloat?
Though a widespread coronavirus vaccine rollout won't happen for months, once life slowly but surely begins to return to normal, things could start to turn around for AMC. After months of being cooped up at home, movie fans will no doubt rush to return to theaters, and once Hollywood starts filming again, there may be a surge of new releases to keep audiences entertained.
The big question is: Can AMC hang on until that happens? While the company said it can stay afloat until July, the impact of a vaccine rollout may not be felt until much later on in the year. And while AMC has managed to raise the cash it needs thus far, it may also be running out of options.
If AMC starts closing theaters, it could be a huge blow to real estate investors. Entertainment REITs, or real estate investment trusts, could get battered, and malls and shopping centers could start losing a key tenant. Of course, if AMC is forced to file for bankruptcy, its stockholders could get hammered, too.
The Millionacres bottom line
All told, it's a tough time to be invested in movie theater chains, or in any real estate endeavor that relies on them to stay open. While AMC may have avoided bankruptcy for now, its future is still very much uncertain.