AMC Theatres Unveils New Debt Deal With Bondholders

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The proposed debt exchange includes the Silver Lake Group purchasing $100 million in new senior notes, a financial lifeline for the exhibitor amid the coronavirus pandemic.

Cinema chain AMC Entertainment Holdings has unveiled a proposed debt restructuring agreement with its bondholders that includes $200 million in fresh cash and the Silver Lake Group purchasing $100 million in new senior notes.

The $200 million will be made available through a rights offering of new subordinated debt to allow holders of AMC's existing subordinated notes to exchange their securities at a discount for new debt to be issued by the company. The debt exchange offer aims at a lower overall debt balance for AMC.

And private equity firm Silver Lake Group, which holds $600 million of AMC convertible bonds, has agreed to purchase $100 million of additional first lien senior notes in exchange for better repayment terms should the company eventually file for Chapter 11 protection.

The proposed debt deal, unveiled in an SEC 8K filing, aims to ensure the cash-strapped cinema chain, which has seen its circuit shut down since mid-March amid the coronavirus pandemic, receives a financial lifeline to stay afloat at least until 2021.

"The company views the transaction as highly beneficial to the company and its shareholders. Upon the completion of the transaction, the company would have (i) reduced the principal amount of its total debt liabilities, (ii) extended the maturities of a significant percentage of its outstanding debt, (iii) decreased cash interest expense and (iv) increased its cash and liquidity position to help navigate the on-going COVID-19 pandemic," AMC said in a statement.

The deal to allow Silver Lake to get further up the repayment line in the event of a bankruptcy is expected to meet with opposition from rival senior lenders that include Apollo Global Management and Ares Management Corp. AMC's first-lien notes holders have been jockeying for position to protect their investments in the exhibitor as its circuit remains closed down during the COVID-19 crisis.

AMC has faced Wall Street speculation it may not survive the novel coronavirus pandemic and a resulting recession and may need to file for a Chapter 11 bankruptcy restructuring or address its high debt load to stay in business. The latest debt restructuring at AMC follows the company raising $500 million in new debt to bolster its balance sheet liquidity in April as it generated no revenue during its circuit shutdown.

At the time, AMC warned that its business survival depended on securing additional incremental financing from its lenders.