AMC Networks (AMC Global Media) · AMCX
PUBLIC DATA CASEHYPOTHETICAL INVESTMENT TERMSHOLDAMC Networks (AMC Global Media) — 10.50% Senior Secured Notes due 2032
Proposed investment
Returns
| Base IRR (p=45%) | 12.6% | PASS |
| Downside IRR (p=35%) | 6.5% | PASS |
| Severe downside IRR (p=20%) | -10.8% | |
| Probability-weighted IRR (of expected cash flows) | 6.1% | FAIL |
| MOIC base / downside / severe | 1.38x / 1.19x / 0.70x | |
| Required IRR (hurdle) | 12% | |
Credit
| Net leverage (LTM Jun-26) | 4.1x | max 6.0x |
| Interest coverage (EBITDA / interest) | 1.84x | |
| Liquidity | $464M | |
| Covenant headroom (base, minimum) | 21% | min 15% |
| Credit score | 59 / 100 | Elevated |
| Next maturity | 2029 | |
Downside
| Recovery (downside / severe) | 61% / 34% |
| Loss given default (severe) | 66% |
| Default period (downside / severe) | none / LTM Jun-29E |
| Probability of default (weighted) | 20% |
| Expected loss | 13.2% |
| Recovery needed for MOIC 1.0x | 64% of face |
Key risks (largest first)
- Thin interest coverage: EBITDA / interest 1.84x at LTM Jun-26 (EBITDA could fall 46% before coverage hits 1.0x).
- Severe-case valuation recovery of 34% is below the 95.0 purchase price: a 66% loss given default.
- Downside-case recovery of 61% falls short of the purchase price.
- Severe case produces a payment default in LTM Jun-29E.
- Covenants breach in the Downside case (LTM Jun-28E); none in the Base case.
Key protections (strongest first)
- First-priority secured position on substantially all assets; 0% of recovery value is senior to us and 84% through our tranche.
- Liquidity of $464M (27% of total debt).
- Base-case refinancing tests pass for all 2 maturing tranche(s); 2 are repaid from cash.
- 10.5% fixed coupon with a pull-to-par from an assumed 95 purchase price
- First-priority lien on substantially all assets; only $420M of debt ranks behind us
Catalysts
- Feb-2029 maturity of $420M unsecured/convertible notes
- Call protection steps down from 2028-07-15 (105.250% → par in 2030)
- H2-2026 content slate and affiliate renewals
Diligence — 6 unresolved high-priority item(s)
Tracker →- Quality of earnings: AOI vs cash — Issue IdentifiedHow much of LTM FCF of ~$190M is timing from program-rights amortization vs spend?
- Programming spend vs amortization — In ProgressWhat is the steady-state content cash need?
- Linear subscriber and ad-revenue decline — In ProgressIs the decline rate accelerating beyond the base case (−4.5%)?
- Indenture review: priming and drop-down protections — Not StartedCan collateral be moved to unrestricted subsidiaries?
- Maturity profile and refinancing plan — In ProgressWill the company pre-fund the Feb-2029 maturities from cash or refinance?
- Covenant package after revolver termination — Issue IdentifiedDo we require maintenance covenants / a minimum-liquidity test in new money?
Investment thesis
Hypothetical: buy $100M face of the public 10.50% Senior Secured Notes due 2032 at an assumed 95. The notes are first-lien on substantially all assets and now sit ahead of only $420M of unsecured/convertible debt, but AOI fell 46% in H1-2026, coverage is below 2x, there is no revolver, and the $1.3B of secured claims is covered only ~1.1x by a going-concern value at 4.5x LTM AOI (and about 0.6x at the Downside trough). The question is whether a ~12% yield compensates for thin collateral coverage if linear decline accelerates.
The question: Does a 11.7% yield on a rank-1 secured claim compensate for 20% probability-weighted default risk and 66% severe-case loss?
Recommendation rationale — evidence from the model
HOLDHOLD (do not size yet): Expected-cash-flow IRR (probability-weighted) clears hurdle (6.1% vs ≥ 12.0%); Downside recovery meets minimum (valuation waterfall) (60.6% vs ≥ 70.0%); Principal protected in severe case (recovery ≥ price) (34 vs 95.0 vs recovery ≥ price).
| Test | Actual | Required | Weight | |
|---|---|---|---|---|
| ✓ | Base-case IRR clears hurdle | 12.6% | ≥ 12.0% | core |
| ✗ | Expected-cash-flow IRR (probability-weighted) clears hurdle | 6.1% | ≥ 12.0% | core |
| ✓ | Downside IRR stays above floor | 6.5% | ≥ 0.0% | core |
| ✗ | Downside recovery meets minimum (valuation waterfall) | 60.6% | ≥ 70.0% | core |
| ✓ | Base-case refinancing succeeds | PASS | PASS | core |
| ✓ | Entry yield meets minimum | 11.7% | ≥ 10.0% | secondary |
| ✓ | Net leverage within maximum | 4.1x | ≤ 6.0x | secondary |
| ✓ | Covenant headroom (base case, minimum) | 21.0% | ≥ 15.0% | secondary |
| ✗ | Principal protected in severe case (recovery ≥ price) | 34 vs 95.0 | recovery ≥ price | secondary |
| ✗ | No unresolved high-priority diligence | 6 open | 0 open | secondary |
Rule: PROCEED if all five core tests pass and ≤ 2 secondary tests fail; PASS if the base case and the downside both fail, or ≥ 3 core tests fail; otherwise HOLD. Thresholds (hurdle 12%, min downside IRR 0%, min yield 10.0%, max leverage 6.0x, min recovery 70%, min covenant headroom 15%) are configurable per case. The Excel Investment Summary tab implements the same rule by formula.
What would change my mind?
- EBITDA declines more than 46% from LTM Jun-26 (coverage < 1.0x) — or more than 23% (first covenant breaks).
- The entry price is above 96.4: the base case no longer earns the 12% hurdle (assumed price 95.0).
- Severe-case recovery returns the purchase price only if the distressed valuation multiple is at least 12.5x EBITDA (the severe case assumes 4.0x); the question is how much cushion we want.
- Collateral / enterprise value falls more than 13% from the base-case valuation: the tranche starts to take losses.
- Market access weakens: base-case pro-forma coverage at refinancing is 1.49x vs the 1.25x test, at an assumed 11.0% refinancing rate — a higher spread or lower EBITDA flips the test.
- Liquidity falls below $200M (hypothetical minimum-liquidity covenant).
- A new filing shows AOI / NOI below the Downside path, a further liability-management transaction primes our collateral, or open high-priority diligence items turn into findings.