AMC’s meme-stock recovery helps it cut debt costs with fresh $1bn deal

AMC Leisure chief govt Adam Aron has fulfilled a brand new yr’s decision to convey down the cinema chain’s curiosity funds, capitalising on its standing as a beneficiary of final yr’s meme inventory craze to borrow practically $1bn from buyers to refinance extra pricey debt.

The fundraising organised by Citigroup acquired blockbuster investor demand, permitting AMC to extend the deal dimension from $500mn to $950mn, in response to folks conversant in the matter.

It marks the newest chapter in AMC’s exceptional restoration after the grim early days of the pandemic. Shares of the corporate soared when retail buyers co-ordinated by social media platforms comparable to Reddit to purchase its inventory. That allowed AMC to lift money by new share gross sales.

The newest debt fundraising will allow AMC to not solely repay bonds with a coupon of 10.5 per cent, borrowed in April 2020, as deliberate, but in addition bonds with a 15 per cent coupon placed on when it was on the point of chapter a yr in the past. The brand new debt will slash the corporate’s rate of interest to 7.5 per cent, in response to folks conversant in the deal.

AMC’s share worth rose from about $2 a share 12 months in the past to a peak of greater than $60 in June earlier than tumbling again to $15.42, giving it a market capitalisation of $7.9bn. 

In the beginning of January, Aron declared that his new yr’s decision for AMC can be to refinance its debt.

“In 2020 and early 2021, AMC took on debt at excessive rates of interest to outlive,” he said on Twitter. “If we are able to, in 2022 I’d prefer to refinance a few of our debt to cut back our curiosity expense, push out some debt maturities by a number of years and loosen covenants.”

The brand new bond additionally removes sure restrictions on AMC, analysts famous, permitting it to incur further debt and improve its capability to pay dividends and make investments.

Traders welcomed the transfer. Company borrowing prices stay traditionally low regardless of an increase in yields prompted by extra hawkish feedback from Federal Reserve officers as they put together to tug again emergency help to monetary markets shaken by the pandemic.

AMC launched preliminary outcomes for the fourth quarter on Tuesday, saying it anticipated adjusted earnings earlier than curiosity, taxes, depreciation and amortisation to have risen to about $150mn in 2021, from a $327mn loss within the fourth quarter of 2020.

“Given the rate of interest and market uncertainty, it looks as if an excellent thought to do that,” mentioned Kevin Baer, founding father of CKC Capital. “We predict extra corporations ought to be doing it.”