just got a credit rating upgrade – and it’s all because of the memes frenzy.
Analysts at S&P Global Ratings say the company is less likely to default after taking advantage of the equity rally to even raise funds in the stock markets.
This is mainly the result of AMC’s ability to raise funds by selling stocks in a rally led by traders organizing themselves on forums such as Reddit. So far this year, the company has raised more than $ 1.8 billion in stock issues, according to S&P.
“As a result, we believe that AMC, which spent $ 120 million per month in the first quarter of 2021, has enough cash to maintain operations as movie theater attendance improves,” analysts wrote. Scott Zari and Rose Oberman in a note from Thursday.
In other words, the company is less likely to seek a deal with lenders to restructure its “heavy debt over $ 5 billion” over the next 6 to 12 months, S&P said. Of course, the company’s bonds have already largely accommodated this expectation. Bonds return 9.2%, according to Bloomberg pricing data, up from more than 20% in February.
The additional liquidity and improved box office footfall outlook could also help the company refinance expensive debt incurred during the pandemic at lower cost, analysts said.
“If the company uses the majority of these products for debt reduction and refinances the expensive debt incurred during the pandemic, it will significantly reduce its interest expense, cash consumption and leverage,” the analysts wrote. . “This, together with our expectation that cinema attendance will likely improve significantly in the second half of 2021, paves the way for a sustainable capital structure. “
Write to Alexandra Scaggs at [email protected]