Blackstone Group Inc. and Starwood Capital Group’s proposed takeover of Extended Stay America Inc. is expected to pass a shareholder vote Friday despite opposition from some of its investors, Bloomberg News reported. Early results show that investors in the lodging company will approve the deal. The figures are preliminary, and shareholders could still change their vote ahead of the meeting Friday. The vote as of Thursday was extremely close. The private equity firms agreed to buy Extended Stay in March for $19.50 a share, boosting their offer by $1 per share after opposition from six shareholders, including Tarsadia Capital, which campaigned to block the deal. Tarsadia and some other investors continued to oppose the deal despite the price increase, arguing that the sales process was flawed, the timing was wrong, and the standalone prospects for the company were better than the value being offered.
Hertz Global Holdings Inc. shareholders have officially notched an improbable win. If not for U.S. regulators, the victory could have been twice as sweet, Bloomberg News reported. All told, Hertz’s bankruptcy exit plan will repay creditors and return more than $1 billion of value to shareholders, lawyer Tom Lauria said on behalf of the company in a Thursday court hearing. But the deal might have delivered more than twice that if Hertz had succeeded in issuing stock to fund its bankruptcy last year, Lauria said. Hertz was an early favorite of traders on Reddit’s WallStreetBets forum, and the ensuing rally prompted the bankrupt firm to explore selling potentially “worthless” shares to raise cash. Hertz scrapped those efforts after Securities and Exchange Commission officials questioned the unusual approach. Instead, Hertz had to borrow more money to fund operations, ultimately arranging a $1.65 billion debtor-in-possession loan from the likes of Apollo Global Management. Because all creditors have to be repaid before equity can get anything in U.S. bankruptcy, the additional debt weighed on recoveries for stockholders. Still, Hertz’s bankruptcy plan is “a fantastic result,” U.S. Bankruptcy Judge Mary Walrath said in hearing Thursday, noting that payouts to equity are virtually unheard of in chapter 11. The case “surpasses any result that I’ve seen in any chapter 11 case that I’ve faced in my 20-plus years,” Judge Walrath said. Read more.
In related news, Hertz Global Holdings Inc. is concluding a chapter 11 case that generated big gains for shareholders, who are usually an afterthought in corporate bankruptcies, WSJ Pro Bankruptcy reported. Bullish individual investors, in particular, were drawn to Hertz and were rewarded for the risk they took on a bankrupt stock. But many of Hertz’s backers are unfamiliar with the bankruptcy process and with their options to get paid under the company’s exit plan, which was approved by a judge Thursday. WSJ Pro Bankruptcy breaks down the choices facing Hertz shareholders, who have a Friday deadline for some parts of the payout. Read more.
Individual stock traders looking to cash in winning bets on Hertz Global Holdings Inc. are in unfamiliar territory as the company exits chapter 11, finding themselves navigating a bankruptcy process that favors the interests of bigger, wealthier investors, WSJ Pro Bankruptcy reported. All Hertz shareholders will get paid on the company’s way out of chapter 11, receiving a mix of cash, securities in the reorganized business and the right to buy stock in the future. By Friday, they must pick among several choices involving the rights to buy additional stock, with their options determined by eligibility standards tied to personal wealth. Shareholders weighing the various decisions include the day traders who bought Hertz stock when it was cheap last year, at the height of the coronavirus pandemic. Some are mom-and-pop investors who don’t meet criteria to take part directly in one of the stock-buying programs, though they could sell their rights to participate to qualified investors. Other investors have trouble understanding their options and said they can’t get straight answers from the company or from their own advisers. Some said they felt left behind in a bankruptcy-exit process that wasn’t developed with amateur investors in mind. Hertz’s situation is unusual due to the dramatic revival in its prospects in recent months. Shareholders rarely matter when a company goes bankrupt, because there is typically not enough value to repay creditors, which must be satisfied in full ahead of equity. Hertz, though, has estimated shareholders will get a payout of $7 to $8 a share, according to court papers.
The city of Long Beach, Calif., will take over daily operations of the historic Queen Mary for the first time in more than 40 years after the ship’s current operator chose to give up the lease in a sudden decision in bankruptcy court, city officials said Friday, the Long Beach Post reported. The move means Long Beach will have complete control of the ship and will be tasked with deciding how much to invest in critical repairs for the aging vessel. An inspection report in April determined the ship would need at least $23 million in critical repairs to remain viable in the next two years. The Long Beach City Council on Tuesday will consider the immediate authorization of $500,000 in Tidelands Critical Infrastructure funds to begin testing and design work for safety projects. Officials said the city will work to identify other funding options to cover a minimum of $5 million in immediate repairs. The action comes as the current leaseholder filed a motion to reject the lease in bankruptcy court on Friday. The ship’s operator Eagle Hospitality Trust filed for chapter 11 protection in January with a total of more than $500 million in debt. The ship’s lease was set to go to auction but did not receive any bidders, while the city had been locked in a legal battle with former operator Urban Commons over a litany of failed lease obligations.
Adam Aron, AMC Entertainment Holdings Inc.’s chief executive, has decided to run with the meme-stock bulls who helped his company avoid bankruptcy during the pandemic, WSJ Pro Bankruptcy reported. More than any CEO swept up in the meme-stock trade, Aron has come to represent the surrealism and opportunities of modern-day trading. He is a Harvard Business School graduate now known for sharing social-media memes of Reddit in-jokes. He has traded a Chinese real-estate firm, the Dalian Wanda Group, for three million individual investors he calls his community. He has promised the new shareholders dividends and free popcorn. And it has helped the world’s largest movie-theater chain emerge from its pandemic hole. AMC raised $587 million Thursday through another stock sale effort, its seventh in nine months, adding up to more than $2.2 billion total since it began its stock sale efforts in August. The sale comes on the heels of a recent rally that brought AMC’s share price to $72 from $10 in early May.
Investors began backpedaling from AMC Entertainment Holdings Inc. after the movie-theater operator said that it plans to sell more stock — while simultaneously cautioning potential buyers of its shares that they might lose all their money, the Wall Street Journal reported. Shares of AMC finished Thursday’s wild trading session down 18% at $51.34 after almost doubling in value the previous day. The stock appeared set to continue its run in Thursday’s premarket trading, notching double-digit percentage gains. The momentum reversed, though, once the company filed with regulators to sell more than 11 million shares and warned against investing in its stock. AMC shares dropped as much as 40%, then later recovered all of those losses before sliding again. The company’s shares had rocketed in recent days — extending their advance this year by 2,850% before Thursday’s decline — after the company sold a chunk of new shares to the hedge fund Mudrick Capital Management LP. The company had leaned into its sudden popularity with individual investors by offering popcorn to shareholders who visit an AMC cinema this summer. (Subscription required.)
AMC Entertainment Holdings Inc. extended Wednesday’s surge in premarket trading as the Reddit retail-trading army continued to gorge on the stock, sending it to heights that has left Wall Street pros perplexed, Bloomberg News reported. After rising 95% to a record high in the last regular session, AMC gained 13% to $71.01 as of 4:02 a.m. in New York. The money-losing movie-theater chain has a market value of more than $30 billion, making it more valuable than at least half of the companies in the S&P 500 Index. While most financial commentators agree that the stock has detached itself from traditional investment fundamentals, they are less sure of the reason. Some cite an abundance of liquidity and savings created during the pandemic, while others point to the impact of social media in providing a platform for small investors to egg each other on.
In the 85 years since its maiden voyage, the RMS Queen Mary has survived rogue waves, transatlantic crossings and even a world war. For the last five decades, it’s enjoyed a second life docked in Long Beach, riding waves of popularity and tough times as a tourist attraction. But the historic ship is now facing its most challenging voyage yet. After years of neglect by a string of operators, the Queen Mary is so creaky and leaky that it needs $23 million in immediate repairs, according to a trove of court documents and inspection reports released last month, the Los Angeles Times reported. There is growing concern that if something is not done soon, the ship could fall into critical disrepair and be in danger of sinking. The Queen Mary has long struggled as a tourist attraction, in part because of the inherent costs that come with maintaining such a large vessel. Its struggles led to a variety of failed proposals that would have sent it to Canada, New Zealand and even back to England. The Queen Mary’s current state of disrepair is extensive: Structural steel is corroded, the bilge system is aging, the hull is compromised and leaks and safety hazards abound, according to an April 28 inspection by city-hired marine engineering firm Elliott Bay Design Group.
Mudrick Capital sold all its stock in AMC Entertainment Holdings Inc. as of Tuesday, the same day the movie theater chain disclosed that the investment firm had bought $230.5 million of fresh shares to bolster its finances, Bloomberg News reported. Mudrick no longer holds any AMC shares and sold at a profit. The firm disposed of its stake after concluding that AMC’s stock is overvalued, propped up by a recent wave of day-trader enthusiasm. AMC said yesterday that it sold stock to Mudrick with plans to “go on offense” for acquisitions. The agreement with New York-based Mudrick was for 8.5 million shares of common stock at $27.12 apiece. The stock purchase came with the assurance that the shares would be “freely tradable,” meaning the firm could sell the shares at any point or in any amount it chose. Debt holders have also benefited from the recent equity rally. Some of its junk-rated second lien bonds due 2026 that were trading as low as 5 cents on the dollar in November are now close to face value, and quotes on its senior subordinated notes maturing in 2027 jumped about 4.5 cents Tuesday to almost 80 cents.
AMC Entertainment Holdings Inc.’s eager retail investors have vaulted the company’s market value to $14 billion for the first time, Bloomberg News reported. Shares extended an intraday rally to soar 49%, the most since late January, at 3:15 p.m. in New York, as the Leawood, Kan.-based company’s value jumped to a record. Volume was also high, with more than 600 million shares changing hands, more than four times the average of the past five sessions. AMC’s revival has been fueled by individual investors eager to save the movie theater industry after it raised more than $1 billion in financing to avoid bankruptcy over recent months. The stock is up more than 1250% year-to-date. Chief Executive Officer Adam Aron has embraced the Reddit-fueled rally and talked to new retail investors on conference calls. The stock has more than doubled since AMC reported quarterly results on May 6, adding more than $10 billion in value. Thursday’s milestone stands out against a market value bottom of $216.8 million, which was hit in April 2020.
