AMC Entertainment Holdings said Thursday it would raise $110 million in new equity capital through the sale of its preferred stock and proposed a reverse stock split, sending the cinema chain’s shares down 11%.
Antara Capital, a current AMC debt holder, will buy APE, the preferred stock, at an average price of 66 cents per share.
Antara will also exchange $100 million in debt for about 91 million APE units, which would reduce AMC’s annual interest expense by about $10 million.
The company said it is also looking to hold a meeting for APE and AMC shareholders to vote on converting APE units into AMC shares and proposed a reverse-split of AMC shares at a 1:10 ratio.
“Given the consistent trading discount that we are routinely seeing in the price of APE units compared to AMC common shares, we believe it is in the best interests of our shareholders for us to simplify our capital structure,” Chief Executive Officer Adam Aron said.
In March, Aron said the movie-theater chain would embark on more “transformational” deals to capitalize on the interest of retail investors following its bet on a troubled gold and silver mine operator.
APE, which has declined nearly 90% since it began trading in August, was up about 82% at $1.24 on Thursday.
AMC in August announced APE as a special dividend for shareholders and a means to raise capital in the future.
“They’ve taken on a lot of debt and it’s the only way to survive,” said Thomas Hayes, chairman and managing member of Great Hill Capital.
“They’re going to have to continue to raise capital to service all this debt to survive and it doesn’t look that promising.”
Aron said AMC had cleared about $180 million of debt in 2022.
At the end of September, AMC’s liabilities were $11.79 billion, which included corporate borrowing of $5.2 billion. Cash and cash equivalents were at $684.6 million, a fall from $1.59 billion a year ago.
The company, which operates over 900 theaters globally, has a market capitalization of $2.74 billion.