Investors plan boycott of AMC buyout deal

Buyout firms’ refusal to honor change-of-control provisions angers AMC bondholders

A $625 million high-yield financing by Apollo Management and JPMorgan that will be used to help pay for the planned $2 billion purchase of AMC Entertainment is encountering stiff resistance from investors. According to Corporate Financing Week, bondholders representing over $50 billion may reportedly boycott the high-yield offering over the buyout firms’ decision not to honor the change-of-control provisions, which are part of the high-yield contracts.

Yet, the buyout firms argue that since Apollo Management has $250 million in preferred shares in AMC and will control the company, the change-of-control provisions will not be activated. Preferred shares are capital stock and represent ownership in a company. They entitle the holder to receive dividend payments—which are fixed—before common stockholders.

The bonds that Apollo Management and JPMorgan have said they will not repurchase are the AEN 2014 8% notes. According to the contract, the bonds were to be repurchased at 101 cents on the dollar. While the notes climbed well above par, in early August they dropped to 93 cents.

Nomura Securities was one investor reportedly enraged by the decision by Apollo Management and JPMorgan. The bank is allegedly considering legal action. Ralph Piscitelli, director of corporate communications at Nomura Securities, declined to comment. It was also reported that investors were further upset by Apollo Management and JPMorgan’s decision to honor similar change-of-control provisions for certain preferred shares.

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