AMC Taps Junk-Bond Market for $500 Million to Refinance High-Cost Pandemic Debt

(Bloomberg) -- AMC Entertainment Holdings Inc. sold a $950 million junk bond after almost doubling the size of the offering amid unexpectedly strong demand at a moment when investors have favored floating-rate loans over bonds.

Citigroup Inc. led the sale of the notes, which are due in 2029 and will be used to help refinance some of the expensive debt AMC acquired to get through pandemic-era shutdowns. The bonds priced with a 7.5% yield, according to a person with knowledge of the matter. The world's largest movie-theater operator, which initially targeted a deal size of $500 million, lowered the yield on the debt from about 8% before.

The increased bond offering suggests strong demand for the deal even as some other high-yield deals have struggled. In the case of AMC, preliminary results just topped expectations, helping improve confidence in the business as theaters reopen.

“The box office is returning and the business is coming back,” said Bloomberg Intelligence analyst Stephen Flynn. “This is clearly a recovery-from-the-pandemic story.”

The 7.5% yield emerges as an attractive coupon in this environment, according to Matt Zloto, a high-yield analyst at research firm CreditSights. Average junk-bond yields, for example, currently offer 5.14%, according to Bloomberg index data.

The deal marks the first junk-bond sale from AMC since 2020, according to data compiled by Bloomberg. The company's Chief Executive Officer Adam Aron said last month that refinancing some of its debt was one of his goals for 2022.

“In 2020 and early 2021, AMC took on debt at high interest rates to survive,” Aron tweeted. “If we can, in 2022 I'd like to refinance some of our debt to reduce our interest expense, push out some debt maturities by several years and loosen covenants.”

Pay Down

Proceeds from the new offering will pay down bonds sold in April 2020 at a higher rate of 10.5% and first-lien notes due 2026 that pay interest at 15%, added the person, who asked not to be identified because they're not authorized to speak about the transaction.

Leawood, Kansas-based AMC teetered on the brink of bankruptcy in late 2020. Then a group of day traders banded together on Reddit and Twitter and started buying its shares along with those of other “meme stock” companies.

AMC's shares traded as low as $15.38 Wednesday, down about 8.8% on the day, after rising to as high as $62.55 last year from a low of $1.98 just a few months before. The company was able to sell shares multiple times, to help chip away at its debt load and fund possible acquisitions.

Even so, its interest-rate obligations have swelled since the pandemic's start. AMC paid more than $328 million in interest on its borrowings in the first nine months of 2021, according to company regulatory filings, up from about $219 million in the same period in 2019.

The company has more than $5 billion of bonds and loans outstanding, according to a company regulatory filing for the quarter ended Sept. 30.