AMC's debt restructuring bodes well for box-office recovery, analyst says

By James Rogers

'This strategic move provides AMC with significant financial flexibility,' says Benchmark analyst Mike Hickey

AMC Entertainment Holdings Inc.'s debt restructuring this week puts the movie-theater chain and original meme stock in a good position for an expected box-office rebound, according to Benchmark.

"This strategic move provides AMC with significant financial flexibility, aligns its capital structure with expected industry growth, and creates the potential for substantial debt reduction through equity conversion, thereby enhancing its balance sheet and positioning the company for a strong recovery from recent box office challenges," Benchmark analyst Mike Hickey said in a note released earlier this week.

AMC (AMC) shares climbed Monday after the company announced the debt restructuring, which extends to up $2.45 billion of debt maturities from 2026 to 2029 and beyond. In a statement, AMC explained that its refinancing transactions extend the maturity of approximately $1.6 billion of the company's debt that was due in 2026 to 2029 and 2030 and provide "significant incremental financial runway."

Related: AMC's stock climbs on debt-restructuring deal

"These transactions include issuing $1.2 billion of new secured term loans due 2029 in exchange for senior secured term loans due 2026, and the potential to extend an additional $800 million of 2026 maturities," Hickey wrote. "Additionally, $500 million of 10%/12% Cash/PIK Toggle Second Lien Subordinated Secured Notes due 2026 will be exchanged for new term loans due 2029 or repurchased with proceeds from $414 million of new exchangeable notes due 2030."

In a note released Tuesday, Wedbush described the debt-restructuring deal as a "significant move" for AMC but said that shareholders can expect to see more volatility in the company's stock. Wedbush also raised its AMC price target to $4 from $3.50.

"Stunningly good AMC news: We successfully refinanced $1.6 billion of debt (with a plan for up to $850 million more)," AMC CEO Adam Aron wrote on X, formerly Twitter, Monday. "Was due to be repaid starting in 21 months. Now maturity dates extended to 2029 & 2030. We get years of added breathing room to build, grow and strengthen AMC."

Related: AMC's debt restructuring a 'significant move' - but expect volatility, Wedbush says

When AMC reported its first-quarter results in May, Aron said in a statement that "better times are ahead." While AMC in its first quarter felt the effects of last year's Hollywood strikes, Aron was optimistic that the box office would rebound. Speaking during a conference call to discuss the results, he said that movies slated for release later in 2024, into 2025 and in the first half of 2026 "hold great promise."

AMC recently enjoyed a busy July 4 weekend, boosted by Universal Pictures' and Illumination's "Despicable Me 4," which opened July 3. The chain has also reaped the benefits of Pixar's animated blockbuster "Inside Out 2."

"Inside Out 2," which opened June 14, quickly surpassed "Dune: Part Two" to become the highest-grossing film of 2024. The movie also hit a $1 billion worldwide box office 19 days after its release, setting a record for an animated film.

Related: AMC debt restructuring sparks more buying in the movie-theater chain's junk bonds

AMC shares are down 7.8% Wednesday after the company said the Hollywood actors and writers strikes had created lingering weakness in the second quarter.

Shares of AMC are down 23.5% in 2024, compared with the S&P 500's SPX gain of 14.5%.

-James Rogers

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