Court ruling sparks climb in AMC bonds; Rite Aid secured notes higher; Carvana declines

By Cristal Cody

Tupelo, Miss., July 24 – AMC Entertainment Holdings, Inc.’s paper jumped more than 5 points in strong trading action on Monday in the first session after the company heard back that it was a ‘no’ from the court on a shareholder lawsuit settlement over its issuance of preferred stock.

AMC Entertainment’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) climbed 6¾ points in heavy trading with the bonds the most active distressed issue seen over the session, a source said.

The company’s common stock closed up 33%.

On Sunday, AMC chief executive officer Adam Aron issued an open letter to investors on his Twitter account, noting it was important the company address the Delaware Court of Chancery’s ruling on Friday since “raising fresh equity in the near term is critical to our company.”

Overall market tone was positive on Monday as the market gets in activity before the Federal Reserve’s rate decision on Wednesday.

The S&P 500 index rose 0.4%.

The iShares iBoxx High Yield Corporate Bond ETF fell 13 cents, or 0.17%, to $75.24.

The CBOE Volatility index moved up 2.28% to 13.91.

Rite Aid Corp.’s 8% senior secured notes due 2026 (Caa3/CCC-/B) continued to improve after adding 4½ points in the prior week.

The bonds went out around 2 points better on the day.

Carvana Co.’s 4 7/8% senior notes due 2029 (Ca/C) dropped 4½ points, but trading supply was light.

AMC up in secondary

AMC Entertainment’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) jumped 6¾ points to 68¾ bid on $15 million of secondary supply on Monday, a source said.

The bonds were yielding 26%.

AMC’s 7½% senior secured first-lien notes due 2029 (Caa1/B-) also rallied 5½ points to 68½ bid and a 16.34% yield on $6 million of paper traded on Monday.

AMC was awaiting a ruling from a June 29-30 hearing in the Delaware Court of Chancery, which was considering a settlement in a shareholder lawsuit brought by Allegheny County Employees’ Retirement System over its issuance of preferred stock.

On Friday, the court declined to approve the settlement as presented, AMC said.

The company filed an addendum to the stipulation on Saturday to address the issues raised by the court and requested that the court approve the settlement with the revised release, according to an 8-K regulatory filing on Monday.

Aron noted in his Twitter comments that the company must be able to raise equity capital, especially with new uncertainty caused by strikes by writers and actors.

“If we are unable to raise equity capital, the risk materially increases of AMC conceivably running out of cash in 2024 or 2025, or of AMC being unable to satisfactorily refinance and stretch out the maturity of some of our debt (which is required of us beginning as early as 2024),” Aron said.

AMC said in Monday’s filing that until the court lifts the status quo order, it will not proceed with filing the amendment to the company’s certificate of incorporation to affect the share increase and the reverse stock split previously approved by stockholders or the conversion of AMC preferred equity units into class A common stock.

The Leawood, Kan.-based movie theater owner’s common stock (NYSE: AMC) closed up 32.95% at $5.85 on Monday on heavy trading totaling 251 million shares. Average volume was 18 million shares. Shares traded as high as $6.23 during the session.

AMC’s preferred stock (NYSE: APE) was flat at $1.80 on 51 million shares traded. Average volume was 12 million shares.

Rite Aid notes up

Rite Aid’s 8% senior secured notes due 2026 (Caa3/CCC-/B) improved around 2 points to 49 bid on Monday on $3.3 million of secondary action, a source said.

The yield was 35.38%.

Rite Aid’s notes added 1¼ points on Friday and went out about 4½ points higher on the week.

The Camp Hill, Pa.-based drugstore chain’s stock (NYSE: RAD) declined 1.89% to $1.56 on Monday.

Carvana bonds lower

Carvana’s 4 7/8% senior notes due 2029 (Ca/C) dropped 4½ points to 58 bid in light trading supply on Monday, a source said.

Secondary volume totaled $1 million.

Carvana’s notes were more active in the prior week after the company posted strong second-quarter results, filed to sell $1 billion of class A common stock and announced an exchange offer of its existing senior notes for up to $4.376 billion in three tranches of new notes.

Trading was light in the company’s equity also on Monday.

The Tempe, Ariz.-based online car retailer’s stock (Nasdaq: CVNA) finished up 1.36% at $46.24 on 21 million shares, less than the average volume of 31 million shares.

Distressed index improves

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns climbed on Friday to 0.28% versus 0.09% on Thursday, minus 0.03% on Wednesday, 0.03% on Tuesday and minus 0.51% at the prior week’s start.

Month-to-date total returns improved to 1.98% going into the weekend, up from 1.69% on Thursday, 1.6% on Wednesday, 1.64% on Tuesday and 1.6% in the first session of the week.

Year-to-date distressed total returns rose to 13.84% on Friday from 13.52% on Thursday, 13.42% on Wednesday, 13.46% on Tuesday and 13.42% at the week’s start.

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