Shares of AMC Entertainment popped 26% on Jan. 25 after the cash-strapped theatre chain announced that it has secured $917 million in fresh capital to avert bankruptcy and fund its financial needs “deep into 2021.” The stock appreciated an additional 10% in Monday’s after-hours trading.
Specifically, AMC (AMC) disclosed that since Dec. 14, it has successfully raised or signed commitment letters to receive $917 million of new equity and debt capital. Out of the new capital, $506 million will be raised from the issuance of 164.7 million new common shares, in addition to the $100 million of first-lien debt. AMC also received commitment letters for $411 million of incremental debt capital through mid-2023.
Furthermore, the theatre chain operator, which has seen its businesses shut down due to the pandemic, said that it expects to make progress in its ongoing talks with theatre landlords about the amounts and timing of owed theatre lease payments.
“Today, the sun is shining on AMC. After securing more than $1 billion of cash between April and November of 2020, through equity and debt raises along with a modest amount of asset sales, we are proud to announce today that over the past six weeks AMC has raised an additional $917 million capital infusion to bolster and solidify our liquidity and financial position,” AMC CEO Adam Aron commented. “This means that any talk of an imminent bankruptcy for AMC is completely off the table.”
“Looking ahead, for AMC to succeed over the medium term, we are going to need for much of the general public in the U.S. and abroad to be vaccinated,” Aron added.
Previously, AMC had estimated that to remain viable through 2021, it would need at least $750 million of additional liquidity to fund its cash requirements.
Over the past five days, shares of AMC soared 89%. That’s after the stock tanked 35% over the past year, as the theater operator has been grappling with the financial fallout from the pandemic-led closures of its cinemas. (See AMC stock analysis on TipRanks)
Wedbush analyst Michael Pachter, who recently reiterated a Hold rating on the stock with a $2.50 price target, doesn’t expect theater attendance levels to begin to normalize until mid-2021.
“AMC remains the highest risk in the exhibition space given its high debt and low available liquidity, resulting in a higher probability that the company will ultimately need to restructure,” Pachter commented in a note to investors. “Should AMC make it through the next several months – until a vaccine is widely distributed – it will certainly be in a difficult position as it then faces substantially more debt to repay than when the pandemic began. It will be years before AMC is able to revisit its prior growth strategy, in our view.”
Meanwhile, the rest of the Street is taking a cautiously bearish outlook on the stock. The Moderate Sell consensus shows 4 recent Holds versus 2 Sells. Looking ahead, the average analyst price target stands at $2.51 and implies 43% downside potential over the coming year.
According to TipRanks' Smart Score system, AMC gets a 3 out of 10, indicating that the stock is likely to underperform market expectations.
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