AMC Entertainment has announced that it is nearing completion of a financial restructuring that will hopefully allow them to remain viable for the near future. Their recent debt swap will cut down their debt significantly, defer some interest payments, and bring in another $300 million dollars of support.
The news comes at a crucial time for AMC Entertainment, as the Coronavirus pandemic continues to delay big-name films and force theaters to stay closed, or open in a reduced capacity. Recent delays for Mulan and Tenet in particular have prompted to the company to delay opening most of its locations across the U.S. until late-August. Theater closings have been especially difficult for AMC, as the company was already suffering under heavy debts, putting it in a troublesome situation.
In broad strokes, this debt swap consists of several of AMC's subordinated debt holders being asked to exchange their currently existing debts for "second-lien" debts. This means that these debt holders will be repaid sooner if AMC does end up filing for bankruptcy in the future, in exchange for taking a small cut to the amount they receive. This gives debt holders more confidence in their investment, while allowing AMC to shave away a little bit of its accrued debt.
These debt holders, along with bondholder Silver Lake, will also be injecting more cash into the company by buying up "first-lien" notes, to the tune of around $300 million dollars. "First-lien" notes are essentially loans taken out by a company, with the promise that, if things go poorly, "first-lien" holders will be paid back before anyone else. Silver Lake's involvement in particular has been controversial with stakeholders, who object to Silver Lake receiving first-lien status over other interested parties. Silver Lake representatives, however, insist that they did not use their seat on AMC's board to their advantage, and negotiated this deal independently.
Regardless of the fine details, this is yet another difficult moment for AMC, which has struggled greatly to manage both the industry-wide hurdles of Coronavirus and their own personal financial concerns. While this deal may give AMC the cash to support themselves through spring, it remains uncertain whether they will be able to maintain themselves beyond that vague time-frame. Presumably AMC Entertainment will have to turn things around in the near future, craft yet another financial restructuring, or bite the bullet and finally prepare to declare bankruptcy.
Source: Deadline