AMC CEO's New Year's resolution: Refinance some debt, strengthen balance sheet

AMC Entertainment’s (AMC) CEO Adam Aron has an ambitious New Year’s resolution for 2022 — to improve the company’s financial position by refinancing some of its pricey, high interest-bearing debt.

Aron said in a tweet on Monday — subsequently legitimized by AMC in a filing with the U.S. Securities and Exchange Commission — that one of the movie theater operator’s goals this year is to reduce interest expenses, push out some debt maturities by several years and “loosen covenants” in order to strengthen its balance sheet.

AMC, Yahoo Finance's 2021 top trending ticker and popular meme stock, has been getting a head start on this resolution. In the third quarter of last year, the company exercised an option to repurchase $35 million of its most expensive debt that carried a minimum interest rate of 15%, its latest available quarterly financial statement showed. The move cost $41.3 million, including principal, redemption price and accrued and unpaid interest but is expected to reduce the company’s annual interest rate expenses by about $5.3 million.

Still, like for many setting goals this January, staying consistent on them in the year ahead could be a challenge for AMC. Of its highest-interest debt, AMC still owed about $73.5 million as of the third quarter, according to the same filing. The company had $5.4 billion in total corporate borrowings as of Sept. 30, nearly half of that debt bearing interest rates of more than 10%.

“There is no guarantee of success, but we will try very hard to get this done,” Aron said in his tweet. “We are always thinking of creative ways to make AMC’s future more secure.”

Shares of AMC rose more than 2% at the open Monday morning following Aron's tweet. The stock closed down 2.5% to $26.52 a piece at the end of the trading session.

Aron pointed out during the company's third quarter earnings call with investors that AMC has prioritized reducing its debt and associated interest costs, with steps throughout 2021 that included converting $600 million of debt into equity, and paying off a $200 million balance on AMC’s revolving credit line, and settling $100 million in deferred rent, also a liability for the company.

“There is no guarantee of success, but we will try very hard to get this done,” said Aron at the time. “We are always thinking of creative ways to make AMC’s future more secure.”

Aron also pointed out during the call that the company has prioritized reducing its debt and associated interest costs, with steps throughout 2021 that included converting $600 million of debt into equity, and paying off a $200 million balance on AMC’s revolving credit line, and settling $100 million in deferred rent, also a liability for the company.

“In 2020 and early 2021, AMC took on debt at high interest rates to survive, “ he tweeted. “With an improving financial position, one of our 2022 goals is to strengthen our balance sheet.”

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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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