Shares of AMC Entertainment (NYSE:AMC) stock are in the red about 3% after Wedbush raised its price target to $4 from $3.50. Yesterday, the movie theater chain announced a refinancing transaction that would extend the maturity of up to $2.45 billion of debt from 2026 to 2029 and later.
This transaction will open up the opportunity to reduce debt by $464 million from the conversion of exchangeable notes into equity. That has dilutive effects on shareholders and is likely why AMC stock is down today.
“Previously AMC had around $2.9 billion in debt maturing in 2026, and this extension significantly improves AMC’s balance sheet position and provides management with financial flexibility to capitalize as the [second half of 2024] and 2025 release slate improves,” wrote Wedbush analyst Alicia Reese.
AMC Stock: Wedbush Raised Its Price Target, But Will See More Dilution First
As for the specifics, AMC will issue $1.2 billion of new 2029 secured term loans in exchange for repurchasing 2026 senior secured term loans. AMC has the option to extend an additional $800 million of 2026 debt to 2029.
Furthermore, AMC will exchange $500 million of 2026 10%/12% cash/payment in kind (PIK) toggle second lien subordinated secured notes for new secured term loans due in 2029. It also has the option to repurchase these notes from the proceeds of $414 million worth of new exchangeable notes due in 2030.
To sum it up, AMC will probably raise capital in the coming months via exchangeable notes and share issuances, according to Reese. That won’t resonate with shareholders, as dilution will result in lower AMC ownership per share.
“However, AMC must cover its interest payments and conserve cash while it posts losses. We expect AMC’s shares to continue to be volatile as its shareholders may boost the share price, only to see it fall again after AMC issues shares,” wrote Reese.
Reese believes that AMC has opportunities for growth, although getting its debt under control is the company’s #1 priority. She points out that AMC expanded its market share last year and can continue to expand its 22.5% share.
Since 2022, AMC has reduced its debt by approximately $1 billion, although a net of $4 billion still remains.
On the date of publication, Eddie Pan did not hold (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
