AMC to reduce debt, deleverage once ample liquidity for Covid is raised

By Devika Patel

Knoxville, Tenn., Aug. 10 – AMC Entertainment Holdings, Inc. plans to keep liquidity high as management wants to ensure the company has enough capital to weather the impact of Covid-19, but debt reduction is a top priority after the liquidity is secured.

The company has come close to bankruptcy and has a large amount of debt, but the debt is laddered with nothing due until 2023, and most debt does not mature until 2026, leaving AMC with plenty of time to deleverage.

“Now, there are some naysayers who are quick to point out the size of our debt load,” president and chief executive officer Adam Aron said on the company’s second quarter ended June 30 earnings conference call on Monday.

“What they do not bother to mention, perhaps because it does not fit their narrative, is that we have smartly laddered that debt.

“We have no debt maturities at all until 2023 and most of our maturities do not come before 2026.

“This gives us considerable time to deleverage our company, to further strengthen our balance sheet and to refinance our liabilities and, hopefully, in better times.

“I’m reminded in all of this, that there were those who were absolutely certain they just knew that AMC would file for bankruptcy in the calendar year 2020 or early in 2021.

“At AMC, we proved them wrong,” Aron said.

The company is considering buying back some low-trading debt.

“Some of our debt is trading at a discount,” Aron said.

“We might be able to buy it back at a discount,” Aron said.

Debt reduction will become a priority after the company ensures its liquidity is sufficient to weather Covid.

“Once we have satisfied ourselves that we have the liquidity to get through Covid, no matter what Covid throws at us, we then we’ll be turning to debt reduction and see if there’s an opportunity there,” Aron said.

Liquidity and debt reduction are top capital allocation priorities.

“Regarding capital allocation, we’re pursuing a balanced approach to capital allocation and our priorities are as follows,” executive vice president and chief financial officer Sean D. Goodman said.

“One, ensuring that we have sufficient liquidity to withstand any bumps along the road, and the inevitable volatility as our industry recovers from the impact of the Covid pandemic.

“Two, strengthening our balance sheet by reducing our debt and associated business costs.

“Three, investing in our business to enhance the guest experience and, four, opportunistically pursuing value-enhancing partnerships for acquisition opportunities.

“With our current solid liquidity position and the recovery that we’re seeing in the business, we believe that it is appropriate to carefully deploy our cash in ways that are most beneficial for the long-termed future of the business,” Goodman said.

Liquidity is strong, with essentially all of the company’s theaters open and management expects theater-level cash flows will turn positive in the fourth quarter.

“We raised yet another $1.25 billion of new equity capital (before commissions and fees) in the quarter, boosting our quarter ending liquidity to more than $2 billion, which is about double the previous highest ever such mark in AMC’s 101-year history,” Aron stated in a Monday press release.

“We believe this gives AMC financial staying power to navigate boldly amidst coronavirus waters and, by June 30, substantially all of our theaters were open again,” Aron stated in the release.

“Based on what we know, and what we see today, we currently estimate that AMC’s theater-level cash flows will turn positive in Q4 of this year, assuming that we all see at least a $5.2 billion domestic box office cumulatively for the year,” Aron said on the call.

Cash and cash equivalents were $1,811,200,000 as of June 30, compared to $308.3 million as of Dec. 31, 2020.

Corporate borrowings were $5.5 billion as of June 30, compared to $5,715,800,000 as of Dec. 31, 2020.

AMC is a movie exhibition company based in Leawood, Kan.

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