Marathon Asset Management has capitalized on the latest meme-stock rally of AMC Entertainment Holdings (AMC), significantly benefiting from the cinema chain's stock surge. Bruce Richards, CEO of Marathon, disclosed on Bloomberg Television that the hedge fund had acquired senior secured AMC debt at a deep discount, purchasing it for approximately 60 cents on the dollar. This debt has since appreciated to over 90 cents, driven by renewed interest in AMC stock, spurred by the return of Keith Gill, known online as “Roaring Kitty.”
The surge in AMC’s stock has provided a substantial cushion for debtholders, enhancing the attractiveness of Marathon's holdings. Richards highlighted that the hedge fund is earning a 15% return on senior secured debt, which is backed by all of AMC’s assets, providing robust downside protection. He credited the gains to the influence of “Roaring Kitty” and the meme stock enthusiasts who have buoyed AMC's market performance. This strategic investment underscores Marathon’s adeptness in identifying and leveraging market opportunities.
(GS)
-AMC Entertainment (AMC) stock surges again, fueled by the return of social media influencer "Roaring Kitty" and a subsequent equity raise.
-This rally benefits Marathon Asset Management, which holds senior secured AMC debt purchased at a discount.
Key Points:
-Marathon CEO Bruce Richards highlights the attractiveness of AMC's debt, offering a 15% return with senior secured status.
-The recent stock surge strengthens AMC's financial position, providing a larger cushion for debtholders like Marathon.
-Richards acknowledges the role of meme stock enthusiasts in driving AMC's price increase.
Looking Ahead:
-AMC's debt reduction strategy, aided by the meme stock rally, improves its financial health.
-Marathon's investment exemplifies how some hedge funds capitalize on market volatility associated with meme stocks.
-The long-term viability of AMC remains uncertain, with its dependence on volatile retail investor sentiment.
AMC Entertainment has strategically used the rally to reduce its debt, mirroring a successful strategy it employed in 2021 to bolster liquidity. The company’s ability to convert heightened market interest into tangible financial benefits has been pivotal. By raising equity during the stock surge, AMC has managed to strengthen its financial position and reassure investors and debtholders alike. This proactive approach has not only reduced AMC's debt burden but also stabilized its balance sheet amidst market volatility.
Richards expressed enthusiasm for the investment, underscoring the lucrative returns and solid security provided by AMC's assets. The hedge fund’s strategic move to acquire the discounted debt has paid off handsomely, illustrating the potential for significant gains in distressed asset investments. The combination of meme-stock momentum and savvy financial maneuvering has positioned both Marathon and AMC to benefit from this market phenomenon.
