© Reuters. FILE PHOTO: An AMC theater is pictured amid the coronavirus disease (COVID-19) pandemic in the Manhattan area of New York City, New York, US, on January 27, 2021. Reuters/Carlo Allegri/File photo
by Jody Godoy
(Reuters) – A judge on Friday rejected a proposed out-of-court settlement between AMC Entertainment (NYSE:) Holdings and holders of its common stock over a stock conversion plan, citing concerns about the release of potential claims by preferred shareholders.
Delaware Vice Chancellor Morgan Zern said in the ruling that she could not approve the agreement “as presented”.
The company was sued in February for allegedly rigging a shareholder vote that would allow the AMC to convert preferred stock to common stock and issue millions of new shares.
The conversion would reduce ownership of common stockholders, but would allow AMC to pay down some of its $5.1 billion debt.
The AMC has told investors that it is burning cash at an unsustainable rate and warned that its inability to raise capital could force the company into bankruptcy.
He cannot execute his plan to do so until the case is resolved. Objections to class action settlements are rare, but the court received more than 2,800 objections to the settlement.