September 26, 2022
AMC Theatres, the world’s largest theatrical operator, Sept. 26 announced it plans to sell upwards of 425 million so-called “AMC Preferred Equity Units (APEs),” an alternative to common shares, to investors in an attempt to reduce its $5.4 billion debt load. The move comes as rival Regal Cinemas’ parent filed for Chapter 11 bankruptcy protection as the movie theater business struggles to return to pre-pandemic 2019 levels.
AMC in August first introduced APEs as a dividend gift to leery common stock shareholders who did not want CEO Adam Aron to issue millions of new stocks that would reduce the value of existing shares. AMC said the APEs provided the company with a currency that could be used in the future, among other things, to further strengthen its balance sheet, including by paying down some of its debt and other liabilities.
The market responded with a selloff of AMC shares (and APEs), which were down more than 7% in midday trading Sept. 26.
Regardless, AMC said that “from time to time” it would issue of up to a maximum of 425 million APE units. The number of units sold would reflect the total number of APEs currently authorized, less a portion held back for equity awards under existing, or if approved by stockholders, future equity incentive plans.
The plan is designed to provide significant flexibility to AMC in achieving its fiscal goals over time.
In a note, Alicia Reese with Wedbush Securities in Portland, Ore., said Aron remains a smooth negotiator with shareholders.
“It was a nice way to get around their investors, who weren’t going to let them issue more shares to raise more cash,” Reese wrote.