The AMC Entertainment CEO’s unusual plan to keep the movie network afloat is lauded

AMC Entertainment CEO Adam Aron impressed corporate America with his unusual plan to keep the pandemic-infected movie chain afloat by selling many shares to small investors.

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

But taking the right side in “Reddit’s recovery” was not always easy and sometimes required Aron to face up to his powerful Wall Street allies, including his friends at private equity giant Apollo Global Management, the sources said.

AMC, the country’s largest cinema chain, said on January 25 that it raised nearly $ 1 billion to help it during the pandemic, which has decimated movie ticket sales since March. Approximately half of the $ 917 million that AMC raised was from the sale of new shares.BARSTOOL’S PORTNOY INCLUDES $ 700K IN AMC SHARES AFTER SQUEEZE TRADE LOSSES

As the world now knows, AMC’s fundraising efforts arrived just in time to profit from a bizarre commercial phenomenon known as “Reddit Rally”, which saw small traders using the Reddit WallStreetBets trading forum and trading apps like Robinhood to invest heavily in defeated stocks.

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

But at the end of last year, AMC had not yet benefited from the demonstration and Aron was being urged by his advisers, a team that included the law firm Weil Gotshal and Moelis & Co., to file for bankruptcy, the sources said.

Waiting to file, they said, would only make it more difficult for the theater chain to regain its post-pandemic balance because of the amount of money needed to stay alive.

AMC has spent about $ 125 million a month since March. And while about 500 of its 600 movie theaters in the United States are open, ticket sales remain stifled by the pandemic and its social detachment requirements.

On October 20, AMC warned investors that if it were unable to raise new money, it would run out of cash by the end of the year. As of November 2, the stock had dropped to $ 2.15 – a 70% drop since the beginning of the year.

LOW AMC ANALYST TO ‘SELL’ IN spite of the recent SPIKE IN STOCK

To increase the pressure, AMC’s creditors – a group led by Apollo, where Aron once worked – were offering the company a tempting $ 1 billion loan to keep it operating in bankruptcy.

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

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

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

“He was convicted,” said the person with knowledge of Aron’s dilemma. Aron was also CEO of Apollo co-founder Josh Harris, Philadelphia 76ers, from 2011 to 2013. Prior to that, he ran what used to be Apollo-controlled ski operator Vail Resorts from 1996 to 2006.

Meanwhile, a much smaller investment bank, B. Riley, had been launching Aron and his CFO Sean Goodman for months with the idea that he could raise money from small investors instead of the institutional investors they have been launching so far using Citigroup and Goldman.

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B. Riley is not well known, but he became a leader in selling shares using a stock market system, in which a company announces plans to sell a number of shares without a roadshow. The sale continues until the shares are sold.

“I think that due to many negative opinions about the space and that AMC was heavily sold, it may have been difficult to turn to traditional institutional investors,” explained B. Riley senior analyst Eric Wold.

B. Riley in 2020 completed 113 of these ATM sales offers compared to 38 from Goldman and 32 from Citigroup, according to Dealogic.

Therefore, Aron and Goodman hired B. Riley to work together with Goldman on a new share offering, while Citigroup changed direction to seek other sources of bankruptcy financing just in case, the sources said.

Goldman and B. Riley started their sales on November 10, selling patiently and while the price was above what the company determined to be an acceptable level, the sources said. “You are not selling $ 1 billion a day, it is more like $ 20 million,” explained a source in the process.

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

The process not only saved the company from bankruptcy, it also saved AMC a lot of money. B. Riley and Goldman received 2.5% of profits from stock sales or $ 18 million, plus expenses, according to public records. The Apollo loan, on the other hand, would have cost the company more than $ 300 million in advisory fees and interest payments, the sources said.

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And after announcing its collection of $ 917 million including debt, AMC raised an additional $ 305 million through the sale of shares – or more than it would have obtained in the event of bankruptcy.

AMC consultants and creditors, including Apollo, did not return calls or declined to comment.

But Aron picked up the phone with the Post to say he was simply determined to save an American tradition.

“AMC is a proud American company with 100 years of tradition,” said Aron. “And going to the movies in our cinemas is very present in the psyche of American consumers. In my heart of hearts, I passionately believed that AMC deserves a second century as brilliant as the first. “