AMC’s Aron resolves to restructure junk-rated debt in 2022
22:30, 3 January 2022
Amid a share price slump and with a looming debt covenant deadline, AMC Entertainment’s CEO Adam Aron announced Monday over Twitter that his 2022 New Year’s resolution is to streamline the AMC balance sheet by refinancing the high-interest debt it incurred to stay afloat in 2021.
“In 2020 and early 2021, AMC took on debt at high interest rates to survive,” Aron tweeted. “If we can, in 2022, I’d like to refinance some of our debt to reduce our interest expense, push out some debt maturities by several years and loosen covenants.”
Aron’s tweet prompted AMC to file an 8-K filing with the US Securities and Exchange Commission (SEC) clarifying “the information in this…disclosure is being furnished and shall not be deemed ‘filed’ for purposes of Section 18 of the Securities Exchange Act of 1934.”
The filing went on to include, “The information in this disclosure, shall not be incorporated by reference into the filings of AMC Entertainment Holdings, except as shall be expressly set forth by specific reference in such filing.”
Interest rate step up
With $1.61bn (£1.19bn) cash on hand and $5.49bn in total debt obligations as of 30 September, AMC faces an interest rate step up next month and the expiration of a minimum-liquidity covenant in April. AMC reported a $224m net loss in the quarter ended 30 September.
AMC stock closed Monday at $26.53, down 2.46% from Friday’s $27.20 closing share price. While still up over 1,219% year-over-year, AMC stock is down 63.5% from the $76.72 52-week high set last June. AMC stock trades over the NYSE under the ticker AMC.
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AMC borrowed heavily
Last March, AMC borrowed $2.25bn under two senior credit facilities due 2024 and 2026, respectively, while simultaneously reaching an agreement to suspend a $144m minimum liquidity covenant on its outstanding debt until 31 March 2022. Additionally, AMC’s European unit Odeon Cinemas opened a £140m and €296m term loan facility due August 2023 at 10.75% interest, with a step up to 11.25% on 15 February.
Further complicating matters, AMC called $35m of a 15%/17% cash/Pay-In-Kind Toggle First-Lien Secured Note at an all-in cost totalling $41m when accounting for unrealised interest payment cost penalties, the company stated in its most recent quarterly 10-Q filing.
The current-coupon 1.25% US Treasury due December 2026 benchmark note currently trades to yield 1.36%. AMC Entertainment, currently rated triple-C by Standard and Poor’s following a two-notch upgrade last June, pays a premium interest rate – or spread – versus benchmark debt securities due to a higher perceived default risk.
Notes coming due
AMC has roughly $800m in outstanding debt due in 2025 and 2026 at 10.5%, $560.3m of a cash/Pay-In-Kind senior term-loan facility due 2023 at a stepped-up 11.25% and $1.95bn in an outstanding credit facility due 2026 at 3.08%.
Second-lien debt includes a $1.51bn 10%/12% cash/Pay-In-Kind subordinated note due 2026 and an additional $290m in subordinated debt due from 2024 through 2027 at interest rates ranging from 5.75% to 6.375%.
Leawood, Kansas-based AMC has $20m in debt-finance principal payments due in 2022 and $580.3m due in 2023. Over 2025 and 2026, AMC has roughly $4.41bn in debt payments scheduled.
“With an improving financial position, one of our 2022 goals is to strengthen our balance sheet,” Aron added in a follow-up tweet. “There is no guarantee of success, but we will try very hard to get this done.”
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