As a dedicated movie buff and long-time AMC Entertainment fan, it’s always a rollercoaster ride following this iconic cinema chain. The latest credit rating upgrade feels like a small victory amidst the looming challenges, but the mountain of debt still seems insurmountable.
AMC Entertainment Holdings’ credit rating was upgraded by S&P Global, yet it still struggles significantly with its total debt burden, despite having recently issued additional debt.
After an upgrade from ‘Selective Default’ (SD) to ‘CCC+’, AMC faced a negative outlook following the issuance of a new $2 billion loan, payable in 2029, and $414 million of exchangeable notes maturing in 2030. S&P Global commented that while AMC has pushed back many of its short-term debts, they still consider the company’s capital structure to be unsustainable due to the heavy debt load it carries.
On July 22, AMC announced that they were addressing their debt obligations by offering their cinemas and associated intellectual property as security to extend the repayment dates on their 2026 debt to 2029. However, S&P Global has indicated that efforts to reduce a projected $4.5 billion in long-term loans could be hindered by challenges within the industry. This is because AMC is navigating through the pandemic and the effects of disruptions in its movie schedule from both actor and writer strikes in Hollywood.
“The pessimistic view indicates that we anticipate AMC’s revenue to decrease by 5% to 7% in 2024, primarily because of a reduced schedule for movie releases in theaters. This prediction leads us to expect negative free cash flow and a debt-to-equity ratio within the mid-7 times range,” the credit agency stated in its analysis of AMC’s overall financial situation.
The credit rating agency predicts that AMC’s box office success is likely to increase by the end of 2024; however, they anticipate that the overall annual performance for that year will significantly underperform compared to the results of 2023.
In the first six months of 2024, the movie industry has experienced substantial turmoil due to strikes, particularly during the second three-month period. Now, S&P Global predicts that total domestic box office earnings for 2024 will be approximately $8.25 billion, representing a drop of around 7% compared to 2023’s figures.
Around January 2021, AMC gained prominence amongst “meme” investors as the company seemed on the brink of bankruptcy due to the economic impact of the pandemic on movie theaters. However, a surge in the stock price provided much-needed support for this cinematic titan, enabling it to improve its financial status and explore various income sources.
However, the recent debt restructuring agreement arises at a time when AMC is dealing with a significant debt obligation. CEO Adam Aron, in response, has been working diligently to lower debts and enhance the financial stability of the company, whenever feasible, to ensure smooth operation. Previous fundraising efforts have been employed to counterbalance the heavy debt burden faced by the company.
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2024-08-06 19:54