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Cineworld is shutting down all of their theaters in the US and UK, staring down the barrel of major financial strain and thin audiences as COVID-19 continues to rack the industry. Though they’re the first chain to take such drastic action, unsustainable cash burn is becoming the norm for their largest competitors in the American market. With an increasing number of blockbuster films delayed to 2021 (or later) and federal aid held up in congress, short-term liquidity remains the largest hurdle. Though there are sprinkles of hope in the Chinese market, where theaters recently expanded allowable capacity to 75%, digital competition, primarily via streaming platforms, also looms large.

Related Stocks: Cineworld Group plc (CNNWF), AMC Entertainment Holdings, Inc. (AMC), Cinemark Holdings, Inc. (CNK), IMAX Corporation (IMAX) ​

Though the move theater industry has managed to fend off a number of threats to its business model in the digital era, the financial damage that COVID-19 has dealt to cinemas around the world is truly unprecedented.

After re-opening their theaters last July, Cineworld Group, the owner of Regal Cinemas, will now suspend operations at all of its theaters in the United States and the United Kingdom on Thursday. The closures will affect 45,000 employees. According to Bloomberg, the company’s debt has soared to $8.5 billion from just $467 million in 2017 as it pursued an international expansion.

Fitch Ratings downgraded Cineworld Group’s Long-Term Issuer Default Rating (IDR) to ‘CCC-‘ from ‘B-‘ and senior secured debt issued by its wholly owned subsidiary Crown Finance US Inc. to ‘CCC’ from ‘B’. Fitch also noted that, although Cineworld expects to receive $200 million from Coronavirus Aid, Relief, and Economic Security Act at some point next year, that will not help the company’s shorter-term liquidity needs.

The group owns 127 theaters in the United Kingdom, including Picturehouse Cinemas, and 536 theaters in the United States. It is the world’s second largest movie theater business after AMC Entertainemnt Holdings.

Last week, S&P Global Ratings reduced AMC’s credit ratings on liquidity concerns as the impact on the mega-exhibitor’s theaters takes a toll on its available cash on hand. In their statement on the downgrade, S&P wrote: “Given our expectations for a high rate of cash burn, we believe the company will run out of liquidity within the next six months unless it is able to raise additional capital, which we view as unlikely, or attendance levels materially improve”.

While AMC has not laid out plans for the status of their theaters going forward, Cinemark recently said the chain has no plans on closing down. Approximately 80% of Cinemark’s circuit is now open, with 97% of guests expressing satisfaction with Cinemark protecting their health and safety.

Loop Capital Markets recently revised its estimates for US domestic box office sales. Analyst Alan Gould wrote in note Monday that ticket sales are expected to plunge 85% in the fourth quarter, a much steeper decline that its prior forecast of sales down just 25%. The third-quarter box office is expected to decline by an additional…

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