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.

References:
[1] James Rogers. (August 15, 2023). What's next for AMC after court approval of revised stock-conversion plan? MarketWatch. https://www.marketwatch.com/news/articles/whats-next-for-amc-after-court-approval-of-revised-stock-conversion-plan-2023-08-15
[2] Alicia Reese. (August 15, 2023). AMC and APE Shares to Converge Around $3 into the Conversion. Wedbush Securities. https://www.wedbushsec.com/research/2023/08/15/amc-and-ape-shares-to-convert-around-3-into-the-conversion
[3] AMC Entertainment. (August 8, 2023). AMC Entertainment Reports Second Quarter 2023 Results. Business Wire. https://www.businesswire.com/news/home/20230808005983/en/AMC-Entertainment-Reports-Second-Quarter-2023-Results