AMC soars 37% after issuing $100 million in debt to stave off bankruptcy

• AMC soared as much as 37% on Tuesday after revealing it raised $100 million in a new debt offering.
• The theater chain issued new debt due in 2026 at a hefty interest rate of 15%, according to an SEC filing.
• The move bolsters AMC's cash reserves as the firm looks to avoid bankruptcy amid widespread theater closures.
• Watch AMC trade live here.

AMC Entertainment rallied as much as 37% on Tuesday after announcing it raised $100 million to extend its cash runway amid widespread theater closures.

The world's largest theater chain issued new debt due in 2026 to raise the extra capital, according to a Securities and Exchange Commission filing published Tuesday. The bonds boast a hefty interest rate of 15%, though AMC's first payment isn't due until July. The theater chain also reserves the right to "pay in kind" by issuing additional bonds and paying a 17% interest rate.

Roughly 193 million shares traded hands by 1:30 p.m. ET Tuesday, more than six times AMC's average volume over the past three months.

The fundraising effort comes after multiple warnings from the company that it could quickly exhaust its cash reserves. AMC said in October it could run out of funds by the end of 2020 or in early 2021 "given the reduced movie slate for the fourth quarter" and weak attendance. While most of the chain's theaters are open, high-earning locations in New York, California, and Washington remain closed.

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AMC can still tap the stock market for additional cash. The chain announced plans to sell up to 50 million shares on December 29, adding to the 200 million shares AMC registered for sale earlier that month.

The debt issuance and possible stock sales have so far kept AMC from bankruptcy, but the moves haven't been kind to long-term shareholders. The company's stock sits roughly 60% lower from the year-ago period, joining travel and leisure companies as some of the hardest-hit by the pandemic.

Conversely, those trading the stock for short-term gains stand to mint healthy profits. Shares sit about 37% higher year-to-date, fueled by a swarm of investors betting the chain can avoid restructuring.

AMC traded at $2.92 as of 1:30 p.m. ET. The company has three "buy" ratings, 10 "hold" ratings, and four "sell" ratings from analysts.

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