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(Reuters) -A judge on Friday rejected a proposed court settlement between AMC Entertainment (NYSE:AMC) Holdings and holders of its common stock over a stock conversion plan, citing concerns about releasing potential claims by preferred shareholders.
Delaware Vice Chancellor Morgan Zurn said in the ruling that she cannot approve the settlement “as submitted.”
The company was sued in February for allegedly rigging a shareholder vote that would allow AMC to convert preferred stock to common stock and issue hundreds of millions of new shares.
The conversion would dilute the common stockholders’ ownership, but allow AMC to pay down some of its $5.1 billion in debt.
AMC has told investors it is burning cash at an unsustainable rate and warned that an inability to raise capital could force the company into bankruptcy.
It cannot carry out its plan to do so until the litigation has been resolved. Objections to class action settlements are rare but the court received more than 2,800 objections to the agreement.
