Movie-theater giant AMC Entertainment Holdings’ reported deal to avoid bankruptcy is running into a roadblock as some creditors oppose the deal, according to Bloomberg News.
Under the terms of the proposal, the 100-year-old Kansas-based company would allow Silver Lake Group LLC, the Menlo Park, Calif., private equity company, to provide $200 million of new money while subordinated bondholders exchange their securities at a discount for new second-lien notes, the news service reported.
It would also extend the maturity on $600 million of convertible bonds held by Silver Lake for two years in exchange for first-lien priority on certain collateral.
But a group of existing first-lien lenders including Apollo Global Management Inc., Ares Management Corp. and Eaton Vance Corp. oppose the deal, saying it benefits some creditors over others at the expense of the company, the sources said.
AMC has been trying to reach an agreement for weeks as it tries to raise cash, manage a debt burden of more than $5 billion and avoid bankruptcy, Bloomberg reported.
The group of opposing first-lien lenders, which also includes CSAM, the asset management unit of Credit Suisse Group AG, and Davidson Kempner Capital Management, argue the transaction violates the company’s fiduciary duty, dilutes the value of their holdings and deprives AMC of additional liquidity, sources told the news outlet.
Los Angeles law firm Gibson, Dunn & Crutcher LLP, which represents the group, has instead offered a $400 million alternative financing package that would include $200 million to be offered on a pro-rata basis to all first-lien lenders.
Last month, AMC announced plans to reopen 450 cinemas at 30 percent capacity in the U.S. on July 15 and a further roughly 150 cinemas in time for the release of “Mulan” later this month and “Tenet” in August.
AMC said all theater workers and guests will have to wear masks when they are in the cinema. Masks will be available for purchase for $1 at every cinema.
The news comes as it was reported that the box office was eyeing its worst year as of 1998 and was forecast to make 40 percent less than last year because of the COVID-19 health situation.
Last month, AMC Entertainment Holdings warned investors that it may not be able to survive “as a going concern” as the movie theater giant struggles with the economic fallout from the coronavirus crisis.