AMC Entertainment’s unusual plan to keep the theater chain going is praised

Adam Aron, CEO of AMC Entertainment, enchanted the US company with his unusual plan to keep the pandemic-ridden theater chain going by selling heaps of stock to small investors.

Ticker	Safety	Last	Alter	Alter%
AMC	AMC ENTERTAINMENT HOLDINGS INC	6.83	-0.26	-3.67%

But to get to the right of the “Reddit rally,” Aron was sometimes required to clash with his powerful allies on Wall Street, including his friends at private equity giant Apollo Global Management, sources said.

AMC, which is the country’s largest theater chain, said on January 25 that it had raised nearly $ 1 billion to help the pandemic, which has reduced movie ticket sales since March. About half of the $ 917 million AMC raised was the sale of new shares.BARSTOOL’S PORTNOY SIT $ 700K IN AMC SHARES NEXT LOSS OF SQUEEZE TRADING

As the world now knows, AMC’s fundraisers came just in time to make money from a bizarre trading phenomenon known as the “Reddit Rally”, where retailers use Reddit trading forum WallStreetBets and trading funds like Robinhood to invest heavily. broken down shares.

In addition to AMC, the madness has also increased the appetite for investors for shares of video game retailer GameStop and Blackberry.

But late last year, AMC had not yet benefited from the protest and Aron was sued by his advisers, a team led by law firm Weil Gotshal and Moelis & Co. included, requesting to file bankruptcy, sources said.

They said it would wait to submit, just making it harder for the theater chain to recover from its post-pandemic due to the amount of cash needed to stay alive.

AMC has been burning about $ 125 million a month since March. And although about 500 of its 600 U.S. movie theaters are now open, ticket sales remain suppressed by the pandemic and social distance.

AMC warned investors on October 20 that if it fails to raise new money, by the end of the year there will be no more cash. By November 2, the stock had fallen to $ 2.15 – up 70 percent since the beginning of the year.

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To increase the pressure, AMC’s first lien creditors – a group led by Apollo, where Aron once worked – offered the company a lucrative $ 1 billion loan to bankrupt the company.

The pressure was so intense that Aron agreed to get the bankruptcy paperwork in order, even though he was pursuing other plans, sources said.

“Ninety-nine of the 100 CEOs would have gone with their advisers,” said a source with direct knowledge of the situation.

The sources said that the Apollo loan was problematic for Aron for several reasons. The least of which was that from 2006 to 2015 he worked as a senior operating partner for the financial giant. By accepting the $ 1 billion to restructure debt into bankruptcy, he dared to be accused. by other creditors to hand over the company to his friends. And if the argument prevailed in bankruptcy court, he lost his job.

“He was fed,” said the person with knowledge of Aaron’s dilemma. Aron was also CEO of co-founder Josh Harris, Philadelphia 76ers, of Apollo from 2011 to 2013. Previously, from 1996 to 2006, he managed the ski operator Vail Resorts, which was controlled by Apollo.

Meanwhile, a much smaller investment bank, B. Riley, Aron and its chief financial officer, Sean Goodman, have been putting up with the idea of ​​raising money from small investors for months instead of the institutional investors they have so far with Citigroup and Goldman saved.

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B. Riley is not known, but has become a leader in selling stocks using a stock market system, where a company plans to sell a certain number of stocks without a roadshow. The sale continues until the shares are sold.

“I think, given a lot of negative views about space and that AMC is severely short-lived, it might have been difficult to go to traditional institutional investors,” explained Eric Wold, senior analyst at B. Riley.

B. Riley completed 113 of these ATM offerings in 2020, compared to Goldman’s 38 and Citigroup’s 32, according to Dealogic.

Therefore, Aron and Goodman hired B. Riley to work with Goldman on a new stock offering, while Citigroup plans to look for other sources of bankruptcy, just in case, sources said.

Goldman and B. Riley began their sales on Nov. 10, selling patiently and as long as the price was higher than the company set an acceptable level, sources said. “You’re not selling $ 1 billion a day, it’s more than $ 20 million,” one source in the process explained.

Goldman would take the lead in selling shares one week, and B. the next week, Riley, acted as equal partners.

The process not only saved the company from bankruptcy, but also saved AMC a lot of money. B. Riley and Goldman collectively paid 2.5 percent of the proceeds from the share sale or $ 18 million, plus expenses, according to public documentation. Apollo’s loan, on the other hand, would have cost the company more than $ 300 million in advisory fees and interest payments, sources said.

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Following the announcement of the $ 917 million fundraising, including debt, AMC raised an additional $ 305 million through share sales – or more than it would end up in bankruptcy.

AMC’s advisers and lenders, including Apollo, either did not return or declined to comment.

But Aron called The Post and said he was simply determined to save an American tradition.

“AMC is a proud American company with 100 years of heritage,” Aron said. ‘And the movie at our theaters is very much in the psyche of American consumers. In my heart, I passionately believed that AMC should deserve a second century as bright as its first. ‘