AMC Entertainment is inching closer to a possible bankruptcy.
The largest U.S. largest movie theater chain, whose cinema houses have been shuttered nationwide since mid-March because of the coronavirus epidemic, is in talks to hire law firm Weil Gotshal & Manges to explore a potential Chapter 11 filing, The Post has learned.
Weil Gotshal’s team is headed up by lawyer Ray Schrock, who lately has worked as bankruptcy counsel to California utility PG&E, the Fairway supermarket chain, and retail icon Sears Holdings, many of whose stores got taken over by billionaire Eddie Lampert.
The insider cautioned that “it’s early stages” and that it’s not clear whether the theater chain has hired any other advisors for the possible restructuring. Nevertheless, a bankruptcy filing looks increasingly likely as the company has already begun to skip rent across its locations, according to the source.
“You don’t hire Ray unless you are filing,” the source said. “You are not going to hire them at their hourly rate to have a beer with them.”
Representatives for AMC AMC, -21.21% and Weil Gotshal didn’t respond to requests for comment on Friday.
In the wake of the coronavirus pandemic, AMC shuttered its 630 US theaters on March 17 and furloughed 25,000 workers. AMC Chief Executive Adam Aron has recently insisted that AMC will be up and running by mid-June, but some analysts have already been predicting a bankruptcy filing in the meantime.
Last week, AMC’s lenders hired law firm Gibson Dunn & Crutcher to advise the chain on a possible restructuring, according to the Wall Street Journal. As reported by The Post, experts note that AMC, which has a debt load of $4.9 billion, is at risk of breaching its debt covenants as it burns through cash amid the coronavirus crisis.
Unless AMC can extract severe concessions from its landlords, a Chapter 11 filing may be hard to avoid, insiders say. A recent letter from senior VP Daniel Ellis informed landlords it would stop paying rent in April.
“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,” Ellis wrote in the letter.
It’s not clear how many theaters AMC would seek to close in bankruptcy, although the 275 lower-priced Carmike locations it acquired in 2016 for $1.1 billion are said to be among the laggards. With many of AMC’s movie theaters housed inside malls, analysts wondered how AMC would able to roar back to life once coronavirus quarantines begin to lift.
“Malls are all shut down,” the source said. “They will be the last to open.”
The source pointed to China, where movie theaters and restaurants have begun reopening with limited seating, putting a stranglehold on how much revenue businesses can reap.
“Every third seat is occupied in China and they are taking customers’ temperatures,” the source noted.
Another issue facing all movie theaters is the backlog of production. Most major studios have delayed the summer releases of their biggest summer blockbusters, like “Mulan,” “Fast & Furious 9” and the James Bond flick “No Time to Die.”