Theater Chain AMC Shares Down as Loop Capital Sees Potential Bankruptcy

AMC was downgraded to sell from hold at Loop Capital, which raised the prospect that the theater chain might file under the bankruptcy laws.
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AMC Entertainment  (AMC) - Get Report shares were lower as analysts at Loop Capital raised the possibility that the theater chain could file under the bankruptcy laws. 

The firm's Alan Gould downgraded AMC to sell from hold while cutting its price target to a Wall-Street-low $1 a share from $4. The figure indicates 68% downside from the stock's Tuesday closing price. 

The Leawood, Kan., company was already over-leveraged heading into the coronavirus pandemic, which has shut down most of the U.S. economy, according to analysts at the firm.

AMC in mid-March shut its U.S. theaters - 1,000 of them with some 11,000 screens - for six to 12 weeks. And it recently sent a letter to landlords stating that it will stop paying rent. 

At the start of April, The Wall Street Journal reported, citing people familiar with the matter, that lenders to AMC had hired the law firm of Gibson, Dunn & Crutcher for advice on expected restructuring talks.

Gould last month noted that the box office was down more than 60% year to date in March.

AMC ended 2019 with $265 million in unrestricted cash and $332 million in undrawn credit, Gould estimated in last month's note. He also projected negative cash flow of $285 million in the first half of the year and said the coronavirus "could lead to some liquidity issues."

With the entire summer slate of blockbuster movies at risk of being postponed, AMC's cash issues could last even after the coronavirus pandemic abates, according to Loop. 

AMC shares at last check were down 2.2% to $3.07.