AMC’s meme stock windfall may help it pay down a massive debt load

Can


AMC
Entertainment
capitalize
on
a
second
meme
craze?

The
stock,
alongside


GameStop,
surged
this
week
after
“Roaring
Kitty,”
the
man
who
inspired
the
massive
short
squeeze
of
2021,
posted
online
for
the
first
time
in
nearly
three
years.
The

return
of
Roaring
Kitty,
whose
legal
name
is
Keith
Gill,
has
led
AMC
shares
to
more
than
double
since
Friday’s
close.
They
rose
above
$6
in
afternoon
trading
Tuesday.

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.

CEO
Adam
Aron
made
three
major
acquisitions
“in
a
relatively
short
amount
of
time”
after
taking
over
the
company
in
2015,
which
included
theater
chains
Carmike,
Odeon
and
Nordic,
said
Eric
Handler,
managing
director
at
Roth
MKM.
AMC
spent
about
$3
billion
on
the
deals
collectively.

While
the
acquisitions
bolstered
the
size
AMC’s
theater
network,
they
also
levered
the
company’s
balance
sheet,
Handler
said.

“So,
when
the
pandemic
hit,
they
sort
of
got
a
double
whammy
because
they
were
already
highly
levered
and
then
they
had
to
raise
more
debt
to
survive
and
give
them
more
cash,”
Handler
said.

Since
the
beginning
of
2022,
AMC
has
paid
down
nearly
$1
billion
of
its
debt,
but
about
$4.6
billion
remains.

AMC
has
around
$20
million
due
in
2024
and
$118
million
due
in
2025,
which
is
“not
a
hurdle,”
according
to
Wedbush
analyst
Alicia
Reese.
But
the
looming
$2.96
billion
set
for
collection
in
2026
requires
the
most
attention.

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

Lenders
have
been
willing
to
renegotiate
terms,
but
a
bump
in
share
price
could
allow
AMC
to
secure
better
deals.

Currently,
AMC
is
paying
about
$100
million
every
quarter
in
interest
expenses,
which
is
eating
into
its
potential
profits.
With
the
box
office
still
recovering
from
pandemic-
and
strike-related
production
shutdowns,
AMC
has
not
been
able
to
absorb
its
fixed
expenses,
such
as
rent,
employee
payroll
and
other
operational
costs,
said
Eric
Wold,
senior
analyst at B.
Riley
Securities.

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

AMC
raised
$250
million
of
new
equity
capital
in
a
sale
that
wrapped
up
Monday,
just
as
the
meme
stock
craze
was
revived.
The
cinema
chain
sold
72.5
million
shares
in
an
at-the-market
equity
offering
that
started
in
late
March.
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.

“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,”
James
Goss,
analyst
at
Barrington
Research,
wrote
in
a
note
to
investors
on
Tuesday.