AMC may be able to pay down its massive debt load thanks to its meme stock windfall

CNBC

The last time these retail investors rallied around AMC and its stock surged, the movie theater chain was able to avoid bankruptcy.
Now, it has a chance to put a dent in its substantial debt load.
While the acquisitions bolstered the size AMC’s theater network, they also levered the company’s balance sheet, Handler said.
Since the beginning of 2022, AMC has paid down nearly $1 billion of its debt, but about $4.6 billion remains.
Lenders have been willing to renegotiate terms, but a bump in share price could allow AMC to secure better deals.
AMC raised $250 million of new equity capital in a sale that wrapped up Monday, just as the meme stock craze was revived.
AMC sold the stock at an average price of $3.45 per share before commissions and fees.
The majority of stock was sold prior to the stock price jump.

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Is there another meme craze that AMC Entertainment can cash in on?

GameStop’s stock and the one that led to the massive short squeeze of 2021, “Roaring Kitty,” both saw a spike this week when they posted online for the first time in almost three years. AMC’s shares have increased by over 100% since Friday’s close thanks to the return of Roaring Kitty, whose real name is Keith Gill. They increased above $6 during Tuesday’s afternoon trade.

The last time these common investors supported AMC and saw a spike in its stock, the chain of movie theaters was able to stave off bankruptcy. It can now begin to make some progress toward paying off its heavy debt.

According to Eric Handler, managing director at Roth MKM, CEO Adam Aron acquired theater chains Carmike, Odeon, and Nordic “in a relatively short amount of time” after taking over the business in 2015. AMC invested a total of roughly $3 billion in the transactions.

The acquisitions strengthened AMC’s theater network, but they also put more strain on the balance sheet of the business, according to Handler.

Being highly leveraged before the pandemic struck, they were essentially dealt a double whammy when they had to take on additional debt in order to survive and obtain additional funding, according to Handler.

AMC has paid off approximately $1 billion of its debt since the start of 2022, leaving about $4,76 billion outstanding.

Alicia Reese, a Wedbush analyst, states that AMC’s approximately $20 million in 2024 and $118 million in 2025 due dates are “not a hurdle.”. The $2.96 billion that is scheduled to be collected in 2026, however, needs the greatest focus.

“A lot of it’s probably just going to get extended maturities, but they’ll be able to renegotiate a portion of it,” Reese told CNBC.

Though they have been open to renegotiating terms, lenders might be more willing to work with AMC if the share price rises.

At the moment, AMC’s prospective profits are being reduced by the roughly $100 million in interest expenses it pays each quarter. According to Eric Wold, senior analyst at B, AMC has not been able to cover its fixed expenses, such as rent, employee payroll, and other operational costs, since the box office is still recuperating from production shutdowns caused by strikes and pandemics. Riley Financial Services.

He said, “To me, what matters is whether or not you can take advantage of this to bolster their balance sheet, like they did a few years ago.”.

In a sale that concluded on Monday, AMC raised $250 million in fresh equity capital, coinciding with the resurgence of the meme stock craze. Beginning in late March, the movie chain’s at-the-market equity offering consisted of 72,5 million shares sold. Before commissions and other costs, AMC sold the stock for an average of $3.45 per share. The bulk of the stock was sold before the increase in price.

James Goss, an analyst at Barrington Research, stated in a note to investors on Tuesday that “the recent surge in the stock presents an additional opportunity to raise equity funds that can support liquidity and debt reduction, eventually moving AMC to a structure that could facilitate institutional support.”.

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