The beleaguered AMC Theatres chain has warned it may have to file for Chapter 11 bankruptcy if it cannot obtain additional sources of liquidity.
The company made the disclosure Tuesday in a filing with the Securities and Exchange Commission about an equity distribution agreement with Citigroup Global Markets and Goldman Sachs to sell up to 15 million class A shares, with the proceeds being used for general corporate purposes. AMC raised $54 million last month through a similar agreement with Citigroup and Goldman Sachs.
“In the event the company determines that these sources of liquidity will not be available to it or will not allow it to meet its obligations as they become due, it would likely seek an in-court or out-of-court restructuring of its liabilities, and in the event of a future liquidation or bankruptcy proceeding, holders of the company’s common stock would likely suffer a total loss of their investment,” AMC said in the new filing.
“We will require significant amounts of additional liquidity and there is substantial doubt about our ability to continue as a going concern for a reasonable period of time; holders of our Class A common stock could suffer a total loss of their investment,” the company also wrote.
AMC also disclosed it had $417.9 million in cash on its balance sheet as of Sept. 30, down from the $508 million cash balance reported as of Aug. 31.
Shares of AMC Entertainment Holdings declined more than 12% on the news to $3.09 in trading Tuesday.
On Oct. 2, credit rating agency Standard and Poors warned that the AMC was in danger of defaulting on its debt due to the ongoing COVID-19 pandemic. S&P downgraded the company’s credit rating from CCC+ to CCC-, moving into the junk bond category, and cited the ongoing struggles in the exhibition industry. Major studios have been delaying high-profile releases in North America in the wake of a downbeat performance by Christopher Nolan’s “Tenet” — which has taken in only $50 million in seven weeks amid reluctance by many moviegoers to attend.
During the Oct. 16-18 weekend, Liam Neeson’s thriller “Honest Thief” limped to first place at the domestic box office, debuting with $4.1 million. Theaters that have reopened have resorted to reduce hours of operation or closing down again entirely due to low attendance.
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