Shares in AMC Entertainment Holdings Inc. (AMC) jumped 12% in extended market trading amid a report that the cash-strapped U.S. theater chain is about to strike a restructuring deal to avoid filing for bankruptcy.
The stock rose to $4.61 in Tuesday’s after-market trading. The proposed deal, which is expected to be disclosed in coming days, would see bondholders providing a $200 million senior loan to swap their unsecured claims at a discount for new, second-lien debt, according to a report by the Wall Street Journal. Private-equity firm Silver Lake Group LLC, which has a representative on the company’s board and owns $600 million of convertible bonds, would swap for first-lien debt.
Senior lenders including Apollo Global Management Inc. (APO), Davidson Kempner Capital Management LP and Ares Management Corp. have rejected the proposal, which would allow Silver Lake to share in the collateral pledged to them. The group made a counterproposal in recent days in which they offered to inject an additional $200 million in senior debt financing, on top of $200 million supplied by junior bondholders. As a condition of the counteroffer, the senior lenders wanted Silver Lake blocked from swapping into the top-ranking debt and subordinated beneath the senior loans in the payment line.
Since mid-March, AMC Entertainment has been forced to close its movie theatres worldwide and temporarily suspend operations as a result of the global lockdowns triggered by the coronavirus outbreak. The company last month said that it is postponing the reopening of the bulk of its U.S. theatres until July 30, following date changes for the releases of two major movies, the live-action remake of Disney’s Mulan and Warner Brothers’ science-fiction thriller Tenet.
Imperial Capital analyst David Miller recently cut the firm’s price target to $4 from $6 and maintained a Hold rating on the shares to reflect a later opening of the theater locations than he expected and added that he also expects higher rent expenses in fiscal 2021.
Shares in AMC dropped 3.5% to $4.13 at the close on Tuesday taking this year’s plunge to 43%. So, it’s not surprising that the consensus of Wall Street analysts is on Hold on the company’s stock. Out of the 10 analysts covering the stock in the past three months, 6 have Holds, 3 have Sells and 1 has a Buy.
Meanwhile, the $4.57 average price target implies 11% upside potential in the shares in the coming 12 months. (See AMC stock analysis on TipRanks).
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