AMC Offering Is Latest IPO For Debt Payback

Company: AMC Entertainment Inc.

Sponsors: Apollo Management, Bain Capital Partners, The Carlyle Group, J.P. Morgan Partners (CCMP Capital Advisors), Spectrum Equity Investors.

Planned IPO Amount: $450 million

Lead Underwriters: J.P. Morgan, Goldman Sachs

For the second time in less than three years, AMC Entertainment Inc. has filed to take itself public through an initial public offering. And similar to its previous attempt, this most recent effort is aimed at strengthening the company’s balance sheet rather than generating returns for its backers.

AMC Entertainment last month set a goal to raise $450 million through an IPO of common stock, the proceeds of which would be used mostly to pay down the company’s debt. The Kansas City, Mo.-based owner/operator of 380 movie theaters is a portfolio company of Apollo Management, Bain Capital Partners, The Carlyle Group, J.P. Morgan Partners (now CCMP Capital Advisors) and Spectrum Equity Investors.

Should the offering succeed, the company intends to use the new capital, along with some existing cash on hand, to repay $198.3 million in outstanding term loans and to retire all $240.8 million of its outstanding 12 percent senior discount notes due 2014.

A final, albeit relatively small, lump some of $29.2 million is to be paid to the sponsors as part of a “fee agreement,” according to the company’s July 14 prospectus. Divided evenly among the quintet of buyout shops, that payment comes to just about $5.8 million per firm.

The company did not disclose in its filing which exchange it plans to list on, how many shares it plans to sell or the expected price range on a per-share basis.

The AMC Entertainment offering is the latest of several similar moves by sponsor-backed companies hoping to tap the IPO market as a means of reducing leverage as opposed to providing windfalls to their equity backers.

Perhaps the largest of these businesses is Nielsen Holdings BV. The company, best known for its television viewership ratings, filed in June to raise up to $1.75 billion from public investors to help whittle down its debt load, which stood at $8.6 billion as of March 31. Nielsen was acquired in 2006 by six buyout firms, including The Blackstone Group and Thomas H Lee Partners, for about $9.7 billion.

Other companies that have filed recently for IPOs in order to pay down debt include Global Aviation Holdings Inc., a provider of air transport services owned by MatlinPatterson, and Tornier BV, a Dutch medical device company owned by Warburg Pincus and venture firm The Vertical Group.

AMC Entertainment was acquired in December 2004 by J.P. Morgan Partners and existing shareholder Apollo Management for a total of $2 billion. Bain Capital, Carlyle Group and Spectrum Equity came into the mix the following year when AMC Entertainment agreed to acquire a competitor, Loews Cineplex Entertainment Corp., which was owned by the trio. As a part of that deal, the three firms took a stake in the combined company.

The plan, a source told Buyouts in 2005, was for the five sponsors to float the combined company on the public market sometime in 2006.

AMC Entertainment filed for a $500 million IPO in September 2007, but the offering was pulled about 13 months later for reasons not made public. At the time of the 2007 filing, the company reported total debt of about $2.3 billion. As of April 2010, that figure remained relatively unchanged, according to its most recent prospectus.

Meantime, AMC Entertainment has remained acquisitive. On May 24, it completed the acquisition of 92 theaters and 928 screens from Kerasotes Showplace Theatres LLC, a Chicago-based portfolio company of Providence Equity Partners.

AMC Entertainment reported $2.4 billion in revenue for the 52 weeks ended April 1, 2010, up from $2.3 billion for the comparable period a year earlier. Adjusted EBITDA for the year ended April 1 was up 31 percent to $327.9 million from $249.7 million a year earlier.

Phone calls to AMC Entertainment were not immediately returned.