- Silver Lake Group made “the trade of a lifetime” on AMC Entertainment, according to one hedge fund manager.
- Another firm, Mudrick Capital, made a similarly successful wager earlier this month.
- The two firms were able to convert distressed debt into equity in AMC after Wednesday’s share-price jump.
- “The market did not believe AMC would be able to get through the downturn – we did,” said Jason Mudrick, founder and CIO of Mudrick Capital.
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Investment firm Silver Lake Group has made the “trade of a lifetime” on AMC Entertainment, one credit hedge fund manager told the Financial Times.
The trade involved Silver Lake swapping risky debt in the downtrodden theatre chain for stock. Now, with AMC shares up as much as 370% this week, the wager has paid off handsomely.
The surge this week triggered $US600 million worth of Silver Lake’s convertible debt notes, allowing the company to exchange its risky debt for the surging equity. The debt was ultimately swapped into stock at a price of $US13.51, according to a regulatory filing. As of Wednesday’s close, Silver Lake’s stake was worth more than $US880 million, according to the FT.
Mudrick Capital is another firm that made a similar trade earlier this month. It exchanged $US100 million in debt for nearly 13 million shares, which are currently worth $US273 million, according to the FT report.
“The market did not believe AMC would be able to get through the downturn â€” we did,” Jason Mudrick, founder and CIO of Mudrick, told Bloomberg.
“AMC has done a great job in capitalising on investors’ appetite for its shares,” added Matt Zloto, co-head of U.S. high-yield research at CreditSights.
The company now says it has enough cash to survive until July at current attendance levels. It also on Wednesday finished issuing another $US304 million of equity at a price of $US4.80.
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