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The S&P Global has upgraded AMC Entertainment’s credit rating from SD (selected default) to CCC, but they still consider the corporation to be environmentally unsustainable.
Despite AMC extending most of its near-term maturities, S&P Global still considers the company’s capital structure unsustainable because of its heavy debt load.
In order to alleviate its financial load, AMC Entertainment put its theater locations and associated intellectual property up for collateral to postpone the maturity of its 2026 loan obligations until 2029, as reported on July 22.
Despite CEO Adam Aron’s claims to the contrary, credit rating agency S&P Global identifies substantial industry-wide obstacles to AMC’s attempts to reduce its long-term debt, which amounts to around $4.5 billion.
The corporation is now dealing with the effects of the COVID-19 outbreak and the strikes that Hollywood actors and writers were attempting at the same time.
Though it has been successful in deferring the debt maturity date, AMC is still dealing with the macroeconomic challenges that the film industry is experiencing.
As if managing AMC’s massive debt load and navigating recovery from the pandemic’s impacts weren’t already difficult enough, the entertainment industry has been hit by two strikes at once.
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The credit ratings agency discussed AMC‘s capital structure and stated that they expect a decline in revenue of 5–7 percent in 2024 due to a limited theatrical release slate. As a result, they anticipate negative free operating cash flow and leverage in the mid-7x area
It is anticipated that AMC’s box office performance would see an improvement by the end of 2024, according to the credit ratings firm. However, they do anticipate that the full-year performance will be significantly poorer than 2023.
As a result of the strikes, the box office had a difficult go of it in the first half of 2024, particularly in Q2.
Total domestic box office revenue is expected to be at $8.25 billion in 2024, according to S&P Global’s forecast. This is a decrease of almost 7% compared to 2023.
The strongest second quarter of June in AMC Entertainment Holdings Inc.’s 104-year history was reported by CEO Adam Aron.
Beyond that, by the end of the second quarter, the firm had amassed about $770 million in of cash and equivalents.
On the second quarter earnings call, Adam Aron stated, “the box office is making a comeback.”
Continuing to back AMC theaters is one way to boost demand, according to CEO Adam Aron’s statement.
He is optimistic and confident because the corporation made $770 million in cash and equivalents.
The CEO backed up this claim by saying that AMC Entertainment’s box office statistics are rising and that they expect future titles to keep driving the company forward.
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