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AMC Theaters Upgraded From ‘Sell’ to ‘Neutral’ as Analyst Says Bankruptcy Risk Has ‘Subsided’

Company’s fair value estimate was also raised from $1 to $5

AMC Theaters was upgraded from a ranking of a “sell” to “neutral” by MKM Partners analyst Eric Handler on Wednesday.

Handler said in his Wednesday report (via The Hollywood Reporter) that the cinema chain’s risk of bankruptcy in the near-term “appears to have subsided.” He said that with Hollywood movies expecting to be available in July and August, that should “considerably” lessen the company’s risk. Handler also raised the company’s fair value estimate from $1 to $5.

“We are still concerned about AMC’s net leverage and absolute level of debt but believe with the expected reopening of the company’s circuit within the next two months there is sufficient cash on hand to get through the end of the year,” Handler wrote.

The analyst also cited Los Angeles County’s target reopening date for all businesses of July 4 and said similar announcements from other major markets such as New York and Chicago would be a positive sign for AMC.

AMC Theaters was forced to furlough more than 26,000 theater employees as a result of the coronavirus pandemic and then additionally furloughed 600 corporate employees, including the company’s CEO Adam Aron.

However, Handler was encouraged by AMC’s ability to raise $500 million in a private debt offering this April.

“April’s debt raise has shored up the balance sheet for now,” Handler said. “That said, we remain concerned with AMC’s overall debt load of $5.35 billion and annual interest payments, which we believe is approaching $350 million.”

AMC Entertainment’s stock price closed at $5.11 on Tuesday, up 11.6%, and was rising at time of writing on Wednesday.