The S&P Global now raises AMC Entertainment’s rating to CCC from SD (selective default), but says the company is “unsustainable”.
“While AMC has extended most of its near-term maturities, we continue to view its capital structure as unsustainable due to its substantial debt burden,” S&P Global said in a statement.
On July 22, AMC Entertainment announced that it had addressed its debt burden by using its theater properties and related intellectual property as collateral to extend the maturity on its 2026 debt obligations out to 2029.
However, according to credit rating agency S&P Global, AMC’s efforts to pay down an estimated $4.5 billion in long-term debt face significant industry-wide challenges, as also stated by CEO Adam Aron.
This is as the company tries to weather the ongoing impact of the COVID-19 pandemic as well as the disruptions caused by the concurrent strikes by Hollywood actors and writers.
So while AMC has succeeded in pushing out its debt maturity timeline, it continues to grapple with macroeconomic headwinds facing the movie theater industry.
The dual strikes in the entertainment sector have further complicated AMC’s efforts to manage its substantial debt load and navigate the recovery from the pandemic’s effects.
“The negative outlook reflects our expectation that AMC’s revenue will decline by 5 percent-7 percent in 2024 due to a limited theatrical release slate, resulting in negative free operating cash flow and leverage in the mid-7x area,” the credit ratings agency added in its commentary about AMC’s overall capital structure.
The credit ratings firm added AMC’s box office performance should improve towards the end of 2024, “but we think that full-year performance will be materially worse than 2023.”
“Through the first half of 2024, the box office has faced significant disruption from the strikes, especially in the second quarter.
We now forecast total domestic box office revenue of around $8.25 billion for 2024, a decline of about 7% compared to 2023,” S&P Global forecasts.
CEO Adam Aron said AMC Entertainment Holdings Inc. had the best Q2 June in its 104-year-old history.
The company was also able to secure more than $770 million in cash equivalents by the end of the second quarter.
The “box office is making a come back”, said Adam Aron during the Q2 earnings call.
In a statement, CEO Adam Aron suggested to continue supporting AMC movie theaters to increase consumer demand.
His optimism and bullish sentiment derives from the $770 million in cash equivalents the company was able to generate.
To further support this sentiment, the CEO cited box office numbers are roaring and anticipates upcoming titles will continue to propel AMC Entertainment forward.
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Also Read: SEC Now Charges CEO For Whopping $170 Million Fraud Scheme
Other Stock Market News Today
GameStop’s Ryan Cohen has now been dragged in a lawsuit for insider trading, and allegedly profiting tens of millions of dollars illegally.
The company formerly known as Bed Bath & Beyond Inc. has sued Ryan Cohen and his company RC Ventures LLC, alleging that they engaged in insider trading and made $47 million in illegal profits.
Cohen is the founder of Chewy Inc. and the chairman and CEO of GameStop Corp. Between January and August 2022, while Cohen and RC Ventures were acting as statutory directors of Bed Bath & Beyond, they allegedly used insider information to make profitable trades in Bed Bath & Beyond’s stock.
The bankrupt Bed Bath & Beyond company claims it is entitled to recover these “short-swing” trading profits under securities law, since Cohen and RC Ventures were acting as directors and also beneficially owned more than 10% of Bed Bath & Beyond’s stock, per Bloomberg.
This lawsuit is part of the company’s broader efforts to recover funds for its creditors as it goes through bankruptcy proceedings.
The company has also sued a New Jersey agency to recover $19 million in tax credits, and is seeking to recover over $300 million in trading profits from another hedge fund involved in a failed financing plan.
RC Ventures is currently the largest shareholder of GameStop, owning an 8.7% stake as of June 2023.
James A. Hunter of Radnor, Pa., represents the plaintiff.
The case is 20230930-DK-BUTTERFLY-I Inc. v. Cohen, S.D.N.Y., No. 1:24-cv-05874, complaint filed 8/1/24.
This is a developing story.
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Also Read: Foreign Markets Are Now Imposing Bans For Illegal Trading
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