MKM Says Bankruptcy Possible For AMC Entertainment As Movie Theaters Sit Empty

With theaters likely to remain closed until August as a result of the coronavirus pandemic, the fate of National CineMedia, Inc. NCMI and AMC Entertainment Holdings Inc AMC will depend on their liquidity profile, according to MKM Partners.

National CineMedia: Shaken But Still Standing

The company’s revenue in the upcoming months is likely to be hit by theatre closures, analyst Eric Handler said in a Thursday note.

National CineMedia will likely operate with zero advertising revenue for another four months, the analyst said. 

The company has an asset-light business model and enough liquidity, with $75 million of cash on hand and another $125 million from its line of credit, to survive current challenges, he said. 

MKM maintained a Neutral rating on National CineMedia and reduced the fair value estimate from $8.50 to $3 to reflect elevated market concerns.

The analyst cut the revenue and earnings estimates for 2020 from $449 million to $258 million and from $203 million to $93 million, respectively. 

AMC Entertainment: Bankruptcy Appears Likely

In a separate note, Handler downgraded AMC Entertainment Holdings from Neutral to Sell and slashed the fair value estimate from $7.50 to $1.

With theater closures at hand, the company does not have the liquidity to remain afloat and may file for bankruptcy, the analyst said. AMC Entertainment has the least financial flexibility among exhibition companies, he said. 

The company had $265 million of cash on hand and $332 million from its lines of credit, according to MKM.

AMC will burn an estimated $155 million per month in a no-revenue environment, Handler said. 

AMC, NCMI Price Action

Shares of National CineMedia were down 3.03% at $2.88 at the time of publication Thursday, while AMC Entertainment shares were down 6.15% at $3.05. 

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