AMC Entertainment announced Monday it’s officially concluded a complex, and controversial, restructuring of approximately $2.6 billion of its debt that included an exchange and fresh capital raise.
The news came as iyd new distribution deal with Universal Pictures continues to roil the industry.
Holders of more than 87% of senior subordinated notes participated in an exchange into new notes, and all of bondholder Silver Lake’s convertible notes were also restructured. As part of the transactions, a group of noteholders and Silver Lake provided AMC with additional liquidity.
As a result, the debt load of the nationa’s largest exhibitor has been reduced by $553 million and the company will get some $355 to $415 million of cash and other liquidity improvements over the coming 12 to 18 months after deducting transaction costs. As part of these transactions, the company issued 5 million new shares to some former holders of its senior subordinated notes, now holders of the new exchanged notes.
AMC’s heavy debt load made it particularly vulnerable to months of zero revenue as COVID-19 has shuttered most of its theaters since March. They are planning to open in the U.S. in mid to late August, although there ‘s still no word about key New York or Los Angeles markets. LA has been in the midst of a coronavirus surge. New York is in better shape but Gov. Andrew Cuomo has given no indication of when he’ll let theaters open.
“This consensual restructuring of our debt and enhancement of our liquidity are extraordinarily important transactions for AMC. We have substantially increased our cash reserves, and improved our liquidity in other ways to extend our financial runway into 2021. This will greatly help AMC, a proud 100 year old company, to get through this period of unprecedented theatre closures caused by the coronavirus. In addition, the debt exchange reduces our debt by more than $550 million and extends our debt maturities to 2026. Now we can focus solely on the all-important task of opening our theatres in the U.S., Europe and the Middle East safely and responsibly, allowing us once again to welcome moviegoers back to our big screens at AMC. As it is said when things get going in the world of movies: lights, camera, action!,” said CEO Adam Aron.
The restructructuing took many weeks to complete as a number of AMC first lien bondholders had protested the exchange, which bumps Silver Lake bonds to first-lien status, diluting their holdings. In the pecking order of bonds, first lien are the top, giving holders first dibs on recovering their investment in case of a bankruptcy.
Subordinated bondholders were asked to take a loss, exchanging their bonds for about 72 cents on the dolllar and in exchange their bonds for about 72 cents on the dollar. To make the exhange more attractive, they were given the opportunity to swap into a higher class of notes.
AMC shares were trading lower late morning, down 3.2% to under four bucks. The exhibitor is taking some flack from its peers after that momentous deal with Universal agreeing to a 17-day theatrical window for movies with an option to move to PVOD after.