Debt reduction is about to become a key focus for movie theater chain AMC Entertainment, according to the company's CEO Adam Aron.
"We are going to get on a path relatively soon to deleverage some more," Aron said in an exclusive interview with Yahoo Finance Live (video above). "I think you can say relatively soon, meaning starting this year and certainly in significant numbers in 2023."
Aron noted that AMC began reducing its debt — known on Wall Street as deleveraging — in the second quarter by buying back $72.5 million in debt for $50 million in cash. That represented a 31% discount, Aron said.
The company ended the second quarter with about $5.4 billion in corporate borrowings, in part reflecting debt incurred to weather the COVID-19 pandemic. AMC also had roughly $4.4 billion in lease obligations for its theaters, which investors also view as a form of debt.
"To survive the pandemic, where our theaters were shut for months on end and our revenues simply disappeared, we did have to borrow more money," Aron explained.
Aron, in his trademark form, is getting creative with his efforts to reduce debt and plow the business ahead.
The cinema chain said late last week it will issue a new dividend in the form of preferred equity units. AMC has applied to list the shares on the New York Stock Exchange (NYSE) under the ticker symbol $APE.
AMC's retail investors — who powered the stock during the COVID-19 pandemic — commonly refer to themselves as apes.
A single APE unit will be granted for each common share, meaning that about 517 million shares of this new stock will be formed. Aron said the company could theoretically list five billion APE shares based on what was approved by shareholders back in 2013, but he has no plans to do so.
"It takes survival risk off the table in the near term," Aron said of the new dividend.