Mudrick Capital Management LP, the hedge fund that provided a much-needed lifeline to AMC Entertainment Holdings Inc. in December, is sitting on hundreds of millions of dollars in gains following last week’s rally in the price of AMC’s shares, WSJ Pro Bankruptcy reported. The New York-based firm made $200 million in profit, mostly from its holdings in AMC debt. Mudrick’s gains derive from a combination of paper gains and realized trades. Last week, AMC shares nearly tripled in value as the cinema chain’s stock caught the attention of individual investors swarming popular Reddit forums who were looking to repeat the dizzying rally seen in shares of GameStop Corp. Most of Mudrick Capital’s gains, however, are from its holdings in the company’s bonds, which rallied as the company’s share price increased. The firm also made about $50 million writing call options last week in the midst of the buying frenzy. The call options will enable holders to buy shares from Mudrick at a predetermined price. When Mudrick provided AMC with the new loan, the firm also received AMC shares as part of its commitment fee, as well as part of a swap of some of the firm’s holdings in junior AMC bonds. In that transaction, Mudrick swapped $100 million in AMC debt for shares.
