Movie Theaters Grapple With Troubling Debt Loads as the COVID-19 Crisis Continues
As coronavirus cases rise in the United States, cinemas around the country are finding their plans for reopening in jeopardy, and that’s putting a greater strain on a section of the economy that’s been hit hard by the public health crisis. For years, movie theater chains such as AMC andembarked on a mergers-and-acquisitions spree financed by debt that left them highly leveraged.
“Studios would love to make some money, but they’re not in as much of a rush to get a return on their investment,” says Eric Wold, an analyst with B. Riley & Co. “You already saw them pushing movies like ‘Minions’ and ‘Fast & Furious’ into 2021. If it turns out that consumer behavior changes and people don’t go back to theaters like they once did, studios can adjust. They can make more content for streaming services, which might even yield higher returns.
“It would be hard to find a buyer for AMC,” says Zev Shechtman, a partner at Danning Gill. “There’s no light at the end of the tunnel for the theater business, so it’s hard to see what they can achieve through bankruptcy.” “First of all, it could be viewed as subsidizing a Chinese-owned media firm in an environment where there are serious questions about how Chinese media disinformation is functioning within the U.S. context,’ she says. The second issue is whether the movie distribution industry merits a government subsidy when other sectors, like health care and education, are also in need.
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