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Coronavirus Pushes AMC Entertainment Closer to Bankruptcy

By Rich Duprey - Apr 13, 2020 at 10:15AM

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The pandemic has been moving the movie theater operator to the brink for over a month.

With all of its 630 movie theaters closed, 25,000 employees furloughed, and no incoming revenue, AMC Entertainment (AMC -5.04%) looks to be inching closer to filing for bankruptcy.

The New York Post reports the theater chain is talking with a law firm to pursue a Chapter 11 filing.

Couple feeling sad at a theater

Image source: Getty Images.

An inexorable force

AMC has been inching closer to bankruptcy ever since the coronavirus pandemic became a reality. First it slashed its dividend, with executives agreeing to big pay cuts to help conserve cash. Then it closed all its theaters.

Earlier this month as the pandemic intensified, the movie house's creditors began preparing for the eventuality of a bankruptcy filing by retaining their own law firm specializing in restructuring. Then the cash crunch AMC was experiencing manifested itself with the theater operator telling its landlords it wouldn't be paying rent beginning April 1.

Now it's reportedly looking to hire the law firm Weil, Gotshal & Manges to pursue bankruptcy protection.

AMC CEO Adam Aron is hopeful its theaters can reopen by mid-June, and Dr. Anthony Fauci who serves on President Trump's coronavirus task force, recently said he also thinks a "rolling reentry" of the economy is possible beginning next month.

Yet the lack of revenue now and the fact a return to normalcy won't materialize right away even if the all-clear signal is given, suggests a restructuring may still be a necessity. 

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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