Embattled cineplex operator AMC Entertainment (NYSE:AMC) may be mulling over a debt extension proposal. According to inside sources familiar with the matter, such a move would push back the company’s near-term debt maturities. Even without the liabilities overhang, AMC stock suffers from broader industry-wide demand erosion.
According to a Bloomberg report, a lender group to the movie theater operator forwarded the aforementioned debt payment extension proposal. As of Dec. 31 of last year, AMC owes approximately $4.5 billion in long-term debt. This figure encompasses more than $2.8 billion of maturities in 2026, per regulatory filings.
The inside sources — who wished to remain anonymous as the matter is private — revealed that the 2026 debt represents a “key component” of negotiations between AMC and some of its creditors. This debt payment mainly comprises two obligations: a $1.9 billion term loan due in April and about $969 million of second-lien notes to be paid in June.
For context, Bloomberg reported that “[a] group of first-lien lenders held a call in March with advisers to discuss ways to bolster the company’s balance sheet.”
AMC Stock Struggles Against an Ailing Box Office
Beyond the debt maturity issue, AMC stock faces a more pressing issue: fading ticket sales at the box office.
Per Bloomberg, “Movie ticket sales in the US and Canada have remained stubbornly below pre-Covid levels, stalling the recovery of theater chains that were closed during the pandemic.” In particular, the news agency pointed out the woes of Metropolitan Theatres, a 100-year-old chain based in California which filed for bankruptcy in March.
Since the beginning of the year, AMC stock lost more than 44% of its market value. In the trailing 52 weeks, it’s down almost 92%. Much of the pain centers on a lack of momentum in the cineplex business.
Last year, inflation-adjusted U.S. box office sales reached $8.95 billion, with an average ticket price of $10.78. However, that’s well off the $13.2 billion tally reached in 2019. And this figure itself is below the inflation-adjusted peak sales of nearly $17 billion, set in 2002.
Back then, the average ticket price was only $5.81.
Why It Matters
Currently, analysts rate AMC stock as a consensus moderate sell. This assessment breaks down as four holds, three sells and, conspicuously, no buys. However, the average price target stands at $4.82, implying almost 42% upside potential. Further, speculators should be aware that AMC carries a short interest of 19.3% of its float. Therefore, a reactionary spike-up is not out of the question on any semblance of good news.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
