Exclusive: AMC Entertainment explores new capital raise amid stock surge

© Reuters. An AMC theatre is pictured in New York

By Mike Spector and Jessica DiNapoli

NEW YORK (Reuters) – AMC Entertainment (NYSE:) Holdings Inc is exploring raising more capital, including through yet another possible stock sale, to weather the COVID-19 pandemic and take advantage of this week’s rally in its shares, people familiar with the matter said on Thursday.

The world’s largest movie theater chain, with about 1,000 cinemas worldwide, suffered unprecedented turmoil after the pandemic last year forced it to temporarily close many venues while attendance dropped at those that remained open. AMC staved off bankruptcy through a debt restructuring deal last summer with its creditors and private equity firm Silver Lake, and a series of other financial transactions in recent months.

AMC said on Monday it had raised $917 million since mid-December through equity and debt issues. “This means that any talk of an imminent bankruptcy for AMC is completely off the table,” Chief Executive Adam Aron said in a statement accompanying disclosure of the additional funds.

On Wednesday, AMC said it raised an additional $304.8 million by selling shares this week, cashing in on an unprecedented social media-driven rally powered by amateur traders taking on hedge funds that had shorted its shares.

On Thursday, it said Silver Lake and other creditors decided to convert debt holdings to equity in a transaction expected to reduce AMC’s obligations by $600 million.

AMC is considering attempting to raise even more money to capitalize further on the frenzy in its shares, the sources said. While its shares dropped about 57% on Thursday, erasing most of the week’s gains, they are still up more than 300% since the beginning of January.

AMC said on Monday its “financial runway has been extended deep into 2021.” Still, it could use proceeds from a new capital raise to further trim its $5.5 billion debt pile as of the end of September, according to the sources.

The cinema chain is considering a share sale while its stock remains high to reap hundreds of millions of dollars, which would give it additional cushion to navigate the pandemic, the sources said. Negotiating more debt-for-equity swaps is also under consideration to reduce the money it owes creditors, the sources added, requesting anonymity because the matter is confidential.

AMC did not immediately respond to a request for comment.

The company has not made any final decisions on near-term financial transactions, and its calculations could change depending on how its stock performs in upcoming trading sessions, the sources said.

AMC is consulting with its creditors and taking other steps as traditionally unpopular stocks have soared in frenzies fueled by social media. GameStop Corp (NYSE:) has been at the center of the volatile trading.

The trading is upending markets and presenting unanticipated opportunities for weakened companies to shore up balance sheets to brace for additional challenges wrought by the pandemic.

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