Dalian Wanda says reports about AMC’s imminent bankruptcy are ‘pure rumours’ as stock, bond prices signal distress amid pandemic
- US-listed AMC Entertainment has furloughed staff including CEO after closing 1,000-odd theatres amid coronavirus pandemic
- Its stock and bond prices have plunged, signalling distress following credit rating cuts
“The recent online media speculation that Wanda’s AMC was filing for bankruptcy is pure rumours,” Wanda said in a statement on its website on Tuesday. The company did not immediately respond to email requests to elaborate on its terse statement.
AMC’s shares have lost 70 per cent in market value this year, while credit downgrades weighed on US$2.8 billion of bonds, leaving them to fetch about 30 cents on the dollar.
The world’s largest theatre operator, AMC had to close more than 1,000 theatres and furlough all of its 24,000 staff in the US, including Chief Executive Adam Aron, at the end of March to preserve cash as deteriorating coronavirus pandemic kept patrons away from enclosed public space such as cinemas.
The coronavirus sickened more than 600,000 people and claimed more than 25,000 lives in the US, making the country the world’s epicentre for the pandemic.
Founder Wang Jianlin is ranked the 14th richest Chinese billionaire with a fortune of 119 billion yuan (US$17 billion), according to the Hurun Global Rich List 2020 released in February, and 68th globally.
It’s a stark contrast with Wanda’s ambitions less than a decade ago, when it embarked on a global shopping spree of assets, fuelled mostly by bank borrowings, to assemble what Wang envisioned as a leisure powerhouse that spanned every aspect of mass-market entertainment from movies and sports events to theme parks, all revolving around its chain of shopping centres.
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The AMC theatre chain had US$265 million of cash at the end of 2019, and total debt of US$10.3 billion, according to Bloomberg data. Some of AMC’s dollar-denominated bonds have callable features from May and June this year, an event that investors typically look as a signal on a company’s repayment intent.
S&P Global cut its rating on AMC by several notches to CCC- earlier this month, saying its theatres are likely to remain shut beyond June. S&P added that it does not believe AMC has sufficient sources of liquidity to cover its expected negative cash flows past midsummer.
The company is likely to violate a senior secured leverage covenant in September, if it’s not able to secure any funding from the government stimulus package or through other lenders, S&P said.
The crunch in Dalian Wanda business empire is also evident closer home as Shenzhen-listed Wanda Film issued a profit warning following the closure of all its mainland cinemas and elsewhere to comply with measures to curb the pandemic.
The movie operator expects to post up to 650 million yuan (US$92 million) of losses in first quarter, compared with a profit of 401 million yuan in the same period last year, according to an exchange filing on Wednesday.
It said the loss is mainly due to the fact that all of its cinemas have been closed since January 23 due to the viral outbreak, and it was unable to run films scheduled for release over the festive Lunar New Year.
