(Bloomberg) — AMC Entertainment Holdings is taking advantage of its meme stock rally to reduce its debt, revisiting a playbook that helped it shore up liquidity in 2021.
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The movie theater chain said in a regulatory filing that it reached a private deal to swap about $164 million of its 10% notes due 2026 for 23.3 million shares of newly-issued stock. Based on the principal exchanged and accrued interest, the new stock had a value of $7.33 per share. AMC shares closed on Tuesday at $6.85.
AMC, much of whose debt trades at distressed prices, has been chipping away at its maturities through other swaps and buybacks. It exchanged around $200 million of the debt for shares last year.
The company has been struggling as movie ticket sales remain stubbornly below pre-pandemic levels. A group of lenders made a proposal to the company to help it push back its near-term debt maturities, Bloomberg previously reported, and the company said it’s working to extend those obligations.
Read more: AMC Cinema Lenders Pitch Debt Extension to Troubled Movie Chain
Last week, AMC reported a first-quarter loss as a thinner slate of releases from Hollywood studios following last year’s strikes by writers and actors weighed on earnings. Despite that, Chief Executive Officer Adam Aron insisted at the time that “better times are ahead.”
The company finished the quarter with $624.2 million in cash and equivalents, down from $884.3 million three months earlier. It has around $4.5 billion of long-term borrowings.
On Tuesday, the firm’s 10% bonds saw a big boost, jumping nearly 10 cents to 85.7 cents on the dollar.
AMC’s shares have soared in recent days, following the return of Keith Gill to social media. Gill rallied Reddit day traders around GameStop Corp. equity in early 2021 under the moniker “Roaring Kitty,” kicking off a larger retail investor movement that boosted many consumer-facing businesses, including AMC.
The debt swap sent shares slumping around 10% in pre-market trading. GameStop shares also showed signs of cooling.
Read more: The Reddit Army Bailout: Desperate Companies Get New Lifelines
During the last rally, the company took advantage of its stock surge to raise hundreds of millions in fresh equity. Investment firm Silver Lake, one of the company’s main creditors, also seized on the opportunity to convert $600 million of bonds into equity, before selling the shares in the open market for a gain of over $100 million.
AMC’s CEO Aron has stayed engaged with the retail investor base — who call themselves “apes” — since.
–With assistance from Lynn Doan.
(Updates with additional details throughout.)
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