AMC shares surged after WSJ reports that some locations would open July 30

Owing to the outbreak of the coronavirus pandemic in the United States, AMC Entertainment Industry has been on lockdown. However, the report revealed yesterday that the company is planning to reopen some of its locations at the end of this month so as to avoid bankruptcy. 

After the news on the reopening, the company shares skyrocketed to as much as 21% after the close of regular trading yesterday. AMC shares rose as high as $4.99 in extended trading after closing at $4.13. The company’s market cap is below $500 million

Due to the pandemic and the close down, AMC has lost more than 40% of its value this year. 

The WallStreet Journal, citing people familiar with the matter, said AMC is working on a restructuring deal, led by Silver Lake, that would have bondholders provide a $200 million loan, swapping out “their unsecured claims at a discount.” AMC would take that route over a financing offer from Apollo Global and other lenders, the Journal reported.

Reasons why AMC might file for bankruptcy

In April, online rumors revealed that AMC is planning to file for bankruptcy. According to the rumor China’s Dalian Wanda Group, which purchased AMC Theaters in 2012, was planning to file for Chapter 11 bankruptcy. 

However, in response to the statement, Dalian Wanda Group said “recent online speculation from the media that Wanda’s AMC is filing for bankruptcy is pure rumors.”

One of the major reasons why AMC might want to file for bankruptcy is the rising debt of the company and the loss triggered by the pandemic.

The current debt of the company is estimated to be more than $4.9 billion. This is because the outbreak of the coronavirus pandemic has forced the company to close down over 1,000 of its locations across the US and Canada. Currently, at least 8 liens had been filed against the company including over $1.75 million in mechanics lien claims, which was revealed after its reported a quarterly loss of $2.17 billion. 

Mark Zoradi, Cinemark’s chief executive officer in a first-quarter earnings conference call with a variety of publications presented a clear picture of the extent the pandemic would affect the industry. “The reality is, I don’t think we’re going to be able to get into a full-on rhythm again of product cycles and all that we had prior to COVID-19 until 2022,” said Zoradi. “That’s more production-related than our operation-related because as studios have had to adapt to not being able to do the filming and do post-production, they’ve had to move their schedules. Therefore, we’re going to adapt as well.”

Although AMC is staving off the filing, the company is deferring some payment till after the pandemic. Some of these payments include rents. This move is expected to be more appealing to landlords because should the company file for bankruptcy, landlords won't be able to get any payment. 

The company's plan on reopening some of its locations would also help to alleviate the need to file for bankruptcy.