AMC Entertainment, the largest theater chain in the U.S., is considering entering an interest-rate swap to convert a 10-year USD175 million fixed-rate bond it issued two weeks ago into a synthetic floating-rate liability, according to a company official. The theater company, which plans to use the proceeds from the offering to reduce its outstanding bank debt and pursue possible acquisitions, is looking to enter a swap in which it would receive a fixed rate equal to the 10.1% coupon on the bond and pay a floating interest-rate. "We always look to the swap market when we do an offering. With the way rates have been getting slashed, we think it's a pretty good bet we'll get a nice floating rate," the official added. The maturity on the swap would equal that of the bond.
Salomon Smith Barney underwrote the offering, but the official said the company is in talks with several firms, which may serve as potential counterparties. "If we decide to go forward with a swap any number of banks could be our counterparty. We have relationships with Goldman Sachs, Lehman Brothers and Morgan Stanley," the official said.
Despite a rating of CCC by Standard & Poor's and a Caa3 rating by Moody's Investors Service, the official said he's confident AMC can find a counterparty willing to make the deal because it has intered interest-rate swaps before.
