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 theater 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 $600 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 $13.51, according to a regulatory filing. As of Wednesday's close, Silver Lake's stake was worth more than $880 million, according to the FT.
Mudrick Capital is another firm that made a similar trade earlier this month. It exchanged $100 million in debt for nearly 13 million shares, which are currently worth $273 million, according to the FT report.
"The market did not believe AMC would be able to get through the downturn — we did," Jason Mudrick, founder and CIO of Mudrick, told Bloomberg.
"AMC has done a great job in capitalizing 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 $304 million of equity at a price of $4.80.
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