Dalian Wanda Group has officially debunked rumors that its cinema chain subsidiary AMC Entertainment is facing possible bankruptcy. The Chinese entertainment and property conglomerate, which holds a majority stake in AMC, denied the reports and claimed that they are nothing more than rumors and speculations.
The company made the announcement in a post on its website on Tuesday following the spread of speculations based on the poor performance of AMC's shares since it crashed earlier in the year. A report from The New York Post, which cited unnamed sources, claimed that AMC had reached out to bankruptcy legal firm Weil Gotshal & Manges to discuss possible options.
Since the start of the year, AMC's share prices have plummeted by more than 70 percent in market value. The company's business was further devastated by the lockdowns and stay-in-place orders imposed by governments worldwide. Due to the restriction imposed to mitigate the spread of the coronavirus, the world's largest movie theater operator was forced to close down its cinemas.
S&P Global had cut AMC's stock rating, stating that the closure of its cinemas will likely continue beyond June. The company also stated that it believes AMC does not have enough resources to cover its negative cash flows if its cinemas continue to be closed past midsummer.
In the US, AMC had closed more than 1,000 of its cinemas and furloughed all of its 24,000 staff members. It also laid off its US chief executive, Adam Aron. The company stated that given the restriction, it had to implement the drastic move to preserve cash and maintain its liquidity.
AMC, which was founded by one of China's richest men, Wang Jianlin, suffered a massive blow as a result of the global pandemic. Other Chinese-owned businesses in the US related to entertainment and tourist were also dealt a big blow. Chinese firm Fosun International was recently forced to shut down businesses such as its ClubMed and Cirque du Soleil units due to the health crisis.
The pandemic will likely be temporarily halting Dalian Wanda Group's ambitious overseas expansion, which it had initially put into action less than a decade ago. Back in 2012, the company had embarked on a global asset shopping spree, acquiring businesses involved in mass-market entertainment, sports, theme parks, and movies.
Dalian Wanda Group bought a majority stake in AMC for $2.6 billion cementing its position in the cinema chain segment. In 2013, the company opened up its $7.4 billion movie production facility in China, meant to rival Hollywood. In 2016, the company bought Legendary Entertainment for $3.5 billion. Under its ownership, the studio managed to produce several blockbuster films, including The Great Wall and Jurassic World: The Lost Kingdom.
