AMC Entertainment Holdings Announces Debt-For-Equity Swap

AMC's Strategy to Boost Liquidity

In premarket trading on Wednesday, AMC Entertainment Holdings revealed a debt-for-equity exchange for bonds worth $163.9 million that are set to mature in 2026. This move is reminiscent of the management's previous strategy that capitalized on retail day traders to increase liquidity in 2021 amidst the fluctuations in "meme stocks".

Details of the Debt-For-Equity Swap

A regulatory filing released on Wednesday morning provided details of the deal. AMC agreed to swap approximately $164 million of its 10% notes due 2026 for 23.3 million shares of newly issued stock, with each share valued at $7.33. According to Bloomberg, AMC, whose debt is largely traded at distressed prices, has been gradually reducing its maturities through other swaps and buybacks. In the previous year, it exchanged about $200 million of debt for shares.

Impact on AMC's Bonds and Shares

The announcement led to a rally in AMC's high-yield bonds. The company has over $2.5 billion in outstanding bonds, the majority of which will mature in 2026. However, the news of the increased supply led to a nearly 9% drop in shares in premarket trading, bringing the price down to the low $6 range. Earlier on Tuesday, shares had reached a high of $11.48 due to the multi-day meme stock frenzy, which was initiated by a post from Roaring Kitty, also known as Keith Gill, on Sunday night.

AMC's Capital Raising Efforts

On Tuesday, AMC also completed a previously disclosed ATM. The deal was facilitated through Citigroup Global Markets, Barclays Capital, B. Riley Securities, and Goldman Sachs & Co., raising about $250 million in new capital for the company.

AMC's Survival Strategy

AMC's management is adhering to the old adage, "Strike while the iron is hot". They are leveraging the activity of retail day traders by completing ATM and debt-for-equity exchanges. Despite facing numerous challenges, the company has managed to stay afloat with the help of Roaring Kitty, who has been instrumental in squeezing bearish hedge funds by driving upside momentum through retail day traders.

Who's Next For The 'Roaring Kitty' Treatment?

This question was posed yesterday: Who will be the next to receive the 'Roaring Kitty' treatment? It's interesting to observe how AMC is using different strategies to stay alive in the market. What are your thoughts on this? Do you think this is a sustainable approach? Feel free to share this article with your friends and engage in a discussion. Don't forget to sign up for the Daily Briefing, which takes place every day at 6pm.