The financial future of the world’s largest theater chain, AMC Theatres, doesn’t look great. Thanks to the COVID-19 pandemic, the film exhibition chain has been forced to shut down all of its locations, furlough thousands of workers (including its CEO), and quite possibly will run out of cash by summertime. But fear not, film fans! It appears that AMC Theatres might be knocked down, but the chain isn’t necessarily knocked out.
According to Deadline, the reports that AMC Theatres is likely going to run out of money by the summer are likely true. In fact, there’s a very real possibility that the chain will file for Chapter 11 bankruptcy before this is all said and done. However, that doesn’t mean that AMC will go out of business and the theatrical experience will die.
Under the rules of Chapter 11 bankruptcy, AMC Theatres would still be able to be operational, though it would likely shed a few locations in the process. This is because AMC would be considered a “critical vendor,” which Deadline describes as “one with a specialized skillset, mandatory safety certification or proprietary product whose discontinuation of service would have a significant negative impact on a debtor’s operations.”
Now, that doesn’t mean that AMC is completely happy with everything that’s going on. Despite the fact that the theater chain is reportedly already discussing which films to include in its reopening, which is currently anticipated for May (though let’s be real, that seems far-fetched). This is the same idea that China has been working on, allowing for theaters to show older films and earn a larger cut of the revenue, to help recoup lost money and ease audiences into coming back to the cinema. That being said, the lack of cash and the prospect of weeks still before reopening has led to AMC to send a letter to its buildings’ landlords saying the company won’t be paying rent for the foreseeable future.
In the letter, AMC assures landlords that they want to pay, but the lack of revenue is forcing the company to cease rent payments. “AMC intends to advocate at the federal level for appropriate relief for the theatre exhibition and real estate industries. AMC is willing to discuss with you any suggestions you may have for getting through this crisis and planning for when AMC can reopen and pay rent,” the letter reads.
Of course, it’s important to note that none of this is confirmed, as we still don’t have a full picture of the financial impact the COVID-19 pandemic will have on theaters just yet. Assuming cinemas can reopen in May, there’s a chance a lot of these issues can be avoided. However, if the social distancing regulations are extended until June or longer, AMC could be in a pretty dicey situation.
Here’s the full letter that AMC sent its landlords recently (via Deadline):
Dear Landlord:
This letter is to formally advise you that AMC temporarily suspended operation of all of its theatres in the United States (including the theatre referenced above) on March 17, 2020 in response to circumstances beyond AMC’s control and specifically the COVID-19 pandemic and the national state of emergency declared by the President of the United States on March 13, 2020, and in compliance with various federal, state and local government mandates and directives (including those that now limit public gatherings to no more than 10 people and emphasize social distancing). All other major theatre operators in the United States have also closed their theatres.
As the crisis unfolded and movie studios pulled major new releases (significantly reducing film product), AMC took steps to adapt and remain open. AMC proactively reduced capacity by 50% per the initial CDC guidelines, and then to 50 persons per auditorium per revised CDC. Some of the steps AMC has implemented are: (a) making the very difficult decision to furlough over 25,000 employees in the United States, (b) instituting a reduced pay program for theatre General Managers, (c) placing a hold on discretionary capital expenditures, and (d) making significant cost and personnel cuts at AMC’s corporate offices.
The final step AMC is currently taking directly impacts you. Without revenue from its theatres, AMC will cease paying rent and charges under the lease effective as of April, 2020.
AMC asks for your patience and understanding during this difficult time. AMC intends to reopen its theatres as soon as possible after it is safe to do so. AMC looks forward to getting back to business as usual.
AMC intends to advocate at the federal level for appropriate relief for the theatre exhibition and real estate industries. AMC is willing to discuss with you any suggestions you may have for getting through this crisis and planning for when AMC can reopen and pay rent.
Sincerely,
AMERICAN MULTI-CINEMA, INC.
Daniel E. Ellis
Senior Vice-President, Development & International
