AMC slips after surprise investment; Diamond Sports mixed following downgrade; Talen off

By Cristal Cody

Tupelo, Miss., March 15 – AMC Entertainment Holdings, Inc.’s notes fell about 1/8 point to over 2 points on Tuesday following the theater owner’s surprise announcement it had ventured into the gold and mining space.

“Don’t know what to think about it,” one trader said. “It doesn’t make any sense. The 10% traded down.”

Diamond Sports Group LLC’s notes were flat to about ½ point softer with the secured notes off ½ point after a downgrade from S&P Global Ratings.

Secondary trading remained active on Tuesday ahead of the Federal Reserve’s widely expected rate hike on Wednesday, while market tone improved with stock indices higher as oil erased gains made since Russia invaded Ukraine.

The iShares iBoxx High Yield Corporate Bond ETF closed up 60 cents to $80.57.

Measured market volatility fell below 30 by the end of the session.

The Chicago Board Options Exchange’s CBOE Volatility index declined over 6% to 29.83.

West Texas Intermediate crude oil benchmark futures for April deliveries settled down $6.57 to $96.44 a barrel.

Talen Energy Supply LLC’s 10½% senior notes due 2026 (Caa2/CCC/CCC) declined nearly 3½ points over Tuesday’s session.

The company’s credit default swaps have widened over 1,000 basis points in the past three weeks.

“If it’s widening, it’s going to be more expensive to insure to get more credit protection,” a source noted. “The unsecureds are trading at 30 cents on the dollar.”

AMC notes drop

AMC’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) dropped 1 point to 85 7/8 bid in early trading and headed out down 7/8 point to 86 bid, a market source said.

The issue saw $17.5 million of notes traded.

The notes were down 1 7/8 points on Monday on $19 million of volume.

AMC’s 5 7/8% subordinated notes due 2026 (Ca/CCC-) were trading over 2 points weaker at the 67 bid area by late afternoon.

The 5¾% subordinated notes due 2025 (Ca/CCC-) also dipped 1/8 point to 74 bid.

The Leawood, Kan.-based movie theater owner announced on Tuesday that it was buying 22% of Hycroft Mining Holding Corp., which operates the 71,000-acre gold and silver Hycroft Mine in Nevada.

AMC said it will invest $27.9 million in cash for a 22% stake, while investor Eric Sprott will match its investment and also receive a 22% stake for a combined $56 million investment.

The private placement deal was expected to close on Tuesday.

AMC’s shares were up 6.86% by the close at $14.48.

Hycroft’s stock rose 9.35% to $1.52.

“To state the obvious, one would not normally think that a movie theatre company’s core competency includes gold or silver mining,” AMC chairman and chief executive officer Adam Aron said in the announcement Tuesday. “In recent years, however, AMC Entertainment has had enormous success and demonstrated expertise in guiding a company with otherwise valuable assets through a time of severe liquidity challenge, the raising of capital, and strengthening of balance sheets, as well as communicating with individual retail investors.”

Aron said at AMC’s urging, Hycroft extended the maturities of $156 million of first-lien debt and second-lien debt from 2025 to 2027.

The mine reportedly has 15 million ounces of gold resources and 600 million ounces of silver resources.

Aron said the transaction is “appealing that the investment requires the commitment of only a nominal amount of AMC cash.”

The company built up a war chest of $1.8 billion in 2021 and is thinking outside the box to maximize shareholder value, Aron said.

AMC has begun adding more theatres to its global network, committed to increasing Imax and Dolby Cinema premium screens, introduced NFT programs and accepted cryptocurrency to boost attendance, as well as reported plans to enter the retail popcorn industry.

Diamond Sports mixed

Diamond Sports’ 5 3/8% second-lien secured notes due 2026 (Caa3/D) fell about ½ point to trade Tuesday at 40 bid, a market source said.

The secured notes moved over the day in the 40¼ bid to over 40¾ bid range.

The issue softened 3/8 point on Monday.

Diamond Sports’ 6 5/8% senior notes due 2027 (Ca/CC) were quoted flat at 22 bid.

The issue was about ½ point softer on Monday.

“They’ve been active,” a source said of Diamond Sports’ distressed paper. “All the prices are very low.”

Diamond Sports’ parent, Sinclair Broadcast Group Inc., announced on March 1 the Chesapeake, Va.-based sports broadcast group completed a new money financing transaction and debt exchange of term loans and notes, which included exchanging the 5 3/8% second-lien notes for its 5 3/8% senior secured notes due 2026.

S&P said on Tuesday it downgraded Diamond Sports to SD from CC and its secured debt to D following the completion of the exchange offer.

However, S&P said it plans to raise the issuer and issue ratings to CCC+ on Wednesday to reflect the company’s improved liquidity profile from the transactions.

Talen declines

Talen’s 10½% senior notes due 2026 (Caa2/CCC/CCC) declined nearly 3½ points on Tuesday to 34 bid, a market source reported.

Secondary supply was light with $3.83 million of volume.

Talen’s 7¼% senior secured notes due 2027 (B1/B) fell about 1½ points to 87 bid during the session.

Talen’s credit default swap spreads have moved out over 1,000 bps in the past three weeks.

From the week of Feb. 16 through the week ended March 9, the Woodlands, Tex., and Allentown, Pa.-based company’s CDS spreads have widened 1,033 bps to 5,201 bps, according to reports from Moody’s Investors Service.

Distressed index down

The S&P U.S. High Yield Corporate Distressed Bond index one-day total return ended Monday at minus 1.07%.

Daily returns softened from minus 0.43% on Friday and minus 0.2% in the same session a week ago.

Month-to-date total returns were soft on Monday at minus 3.94%, compared to minus 2.9% ahead of the weekend and minus 1.23% in the week-ago session.

Year-to-date index returns widened to minus 7.15% on Monday versus minus 6.15% on Friday and minus 4.54% in the March 7 session.

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