I just got a credit rating upgrade – and all because of the madness of the meme.
Analysts at S&P Global Ratings say the company is less likely to default after using the meme stock to raise money in the stock markets.
The company’s debt is still classified within the most speculative layer of bonds, except for those of companies that are on or in default. But S&P Ratings raised its rating by two notches to CCC +, leaving it at seven levels below the investment grade and reflecting a lower probability of default.
This is primarily due to AMC’s ability to raise money by selling shares in a rally led by traders organized in bulletin boards such as Reddit. So far this year, the company has raised more than $ 1.8 billion in shares, according to S&P.
“As a result, we believe that AMC, which had a monthly cash burn of $ 120 million in the first quarter of 2021, has enough liquidity to sustain its operations as theater attendance improves.” analysts Scott Zari and Rose Oberman wrote on Thursday.
In other words, the company is less likely to seek a deal with creditors to restructure its “heavy debt of more than $ 5 billion” over the next 6 to 12 months, S&P said. Of course, the company’s bonds are already valued mostly in this expectation. Bonds yielded 9.2%, according to Bloomberg’s pricing data, up from more than 20% in February.
The extra cash and a brighter outlook for cashier attendance could also help the company refinance expensive debt taken during the pandemic at lower costs, analysts say.
“If the company uses most of this revenue to reduce debt and refinance expensive debt accumulated during the pandemic, it will significantly reduce its interest rate, money burning and leverage,” analysts wrote. “This, together with our expectations that theater attendance is likely to improve significantly in the second half of 2021, paves the way for a sustainable capital structure.”
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