Why AMC stock rebounded on Friday
Actions of AMC Entertainment Holdings (NYSE: AMC) rebound from their Thursday selloff, rising 3.4% through 9:40 a.m. EDT today.
The reason: this morning, S&P Global Ratings upgraded the stock’s credit from CCC + to CCC-.
This may sound like bad news. (Shouldn’t “less” be worse than “more” after all?) But in fact, this move is a two-step upgrade from AMC’s previous rating and says the agency rating is a little more confident today than it is. was yesterday on AMC’s ability to eventually repay its debt of more than $ 11 billion.
To do this, the agency says, AMC must use the cash it has earned on sales of shares to pay off some of its debt, refinance the rest at lower interest rates, and enjoy higher revenues as moviegoers return to its theaters.
If all of this happens, the credit agency says, AMC could have “a path to a sustainable capital future.”
Three points must however be added to the above. First of all, of course, that’s a lot to ask of poor AMC. He was hampered by a pandemic and unexpectedly came out of the recession without declaring bankruptcy – but burdened with heavy debt.
Second, CCC- is not as bad a credit rating as CCC +, but it is still a junk bond rating. Don’t do more of this news than it is.
Third and finally: the sales of shares on which S&P says AMC depends for start repaying off debt has inflated the number of shares of the company by a factor of five, compared to the end of 2019. Even if the company is successful in paying off its debt, it is far less profit than each individual shareholder can expect shoot from AMC.
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