AMC Entertainment, an American movie theater chain, has seen its stock soar once again, partly thanks to the reappearance of ‘Roaring Kitty’ (aka Keith Gill) — a key instigator in last year’s major short squeeze. This significant surge in AMC’s share prices since Friday could prove to be a godsend for the company, which carries a heavy debt load.
Since adopting the reins in 2015, AMC’s CEO, Adam Aron, has been proactive in acquiring a significant portion of the theatre market. His three main acquisitions were Carmike, Odeon, and Nordic, which collectively cost AMC around $3 billion. While these purchases significantly increased AMC’s theater network, it also turned up the leverage on their balance sheet.
The onset of the COVID-19 pandemic exacerbated AMC’s financial woes as the company, already shouldering a high debt load, had to borrow even more money to stay afloat. With cinemas being shuttered worldwide due to lockdown measures, additional funds were vital to ensuring their survival.
Since the turn of the year, AMC has made payments totaling close to $1 billion towards its debt. However, a whopping $4.6 billion still stands outstanding. The largest part of this debt is due in 2026, with a bill of $2.96 billion. A smaller fraction of $20 million and $118 million are due in 2024 and 2025 respectively, which, according to Alicia Reese, a Wedbush analyst, won’t pose considerable challenges.
Reese told CNBC that AMC is likely able to renegotiate some of the upcoming debt, but the majority will most likely see extended maturities. The recent bump in AMC’s stock price could prove beneficial in securing better conditions for these re-negotiations.
AMC’s current financial obligations also include approximately $100 million in interest expenses every quarter. As the film industry slowly recovers from pandemic-related production halts, AMC continues to bear its fixed costs such as rent, workforce wages, and other operational expenses.
This alleviates the recent news of AMC managing to raise $250 million in new equity capital, following the resurgence of the meme stock wave. The company offloaded 72.5 million shares as part of an at-the-market equity offering that began in late March. The expected jump in stock price offers an opportunity to further raise equity funds to restore financial health and reduce debt.
James Goss, an analyst at Barrington Research, pointed out that this could gradually transform AMC towards a structure that is more attractive to institutional backers. It seems that AMC’s latest ride on the meme stock rollercoaster might just be its ticket to gradually lower its enormous debt pile.
