AMC to issue class A stock for second lien sub notes due 2026.
AInvest WireWed, May 15, 2024 ET
1min read
AMC --

AMC to issue class A stock for second lien sub notes due 2026.

In a significant development, AMC Entertainment Holdings Inc. (AMC) recently announced its plans to issue Class A common stock for its second lien sub notes due 2026 [1]. This move comes after the Delaware Chancery Court's approval of AMC's revised stock-conversion plan on August 11, 2023 [1].

CEO Adam Aron described the court approval as a "significant milestone" and a "terrific relief," as the theater chain has been grappling with liquidity challenges [1]. AMC aims to raise capital efficiently by converting its preferred equity units (APEs) into a single common share class [1].

In a reverse 1-for-10 split of its common stock and an increase in authorized common shares, AMC expects to complete the conversion process on August 25, 2023 [1]. The company plans to issue a settlement payment consisting of one share of Class A common stock for every 7.5 shares of Class A common stock owned by settlement-payment recipients on August 24, 2023 [1].

The court's approval of AMC's stock-conversion plan removes a significant overhang for the company, allowing it to focus on eliminating debt and improving its overall financial position [2]. Analyst Alicia Reese expects the AMC and APE shares to converge around $3 into the conversion, resulting in 158 million AMC shares outstanding and APE shares no longer trading [2].

Despite the positive developments, AMC faces challenges in managing its debt balance effectively. It can only issue up to 550 million shares, and removing a substantial portion of its debt could potentially lead to losing its shareholder base due to diluted shares [2].

AMC's stock rallied after the company reported its highest quarterly attendance since 2019 and swung to profit [3]. However, the company's financial health remains uncertain, and investors should closely monitor its progress in eliminating debt and improving its financial position.

[1] James Rogers. (August 15, 2023). What's next for AMC after court approval of revised stock-conversion plan? MarketWatch.
[2] Alicia Reese. (August 15, 2023). AMC and APE Shares to Converge Around $3 into the Conversion. Wedbush Securities.
[3] AMC Entertainment. (August 8, 2023). AMC Entertainment Reports Second Quarter 2023 Results. Business Wire.

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.