Metue.com

There’s an old saying that says if you owe a bank a thousand dollars they own you but if you owe them a billion, you own them.  While the numbers in the saying vary, today, media mogul Sumner Redstone seems to have validated the theory of the adage: if you owe enough, you’re in control. 

Redstone’s National Amusements, the controlling shareholder of CBS Corp and Viacom Inc, had $800m out of a total $1.6b  in debt obligations due to be repaid Friday.   The bill wasn’t paid.  Instead, the 15 lenders provided National Amusements an indefinite extension, the New York Post reported.

Already this year, Redstone sold several hundred million dollars worth of non-voting CBS and Viacom shares to satisfy loan covenants on the debt.  He also liquidated his holdings in Midway Games at a substantial loss.     

After the sale of CBS and Viacom shares Redstone vowed not to sell anymore of his holdings in the two media companies.  With bankruptcy for National Amusements not considered a tenable  solution by any involved, and no immediate liquidity fix at hand, the creditors let the loan default pass by untended.  The discussions for repayment or restructuring, however, are ongoing. 

Currently, in addition to holding majority interests in CBS and Viacom, National Amusements (according to the company website) operates about 115 US movie theaters, another twenty in South America, twenty eight in the UK and five in Russia.  A substantial majority of the US theaters have been equipped to display 3D digital movies.  At least four are home to Imax theaters and at least another twenty are part of  the company’s premium brand (“Cinema De Lux”) which features amenities like in seat food delivery, or even cocktail service.

The present plan under discussion, reports indicate, involves breaking up, or selling off, many of the movie theaters to raise cash.  If that happens, speculation is that National Amusements would keep its Northeastern theaters and their premium California “Bridge” property. 

To insure some geographic and calendar revenue diversification (due to different release dates for films overseas), some International properties would likely be included too – probably the UK. The twenty South American theaters, and the five in Russia would be divested.

Ongoing disagreement in the Redstone family may be one obstacle in the way of an accepted deal.  Shari Redstone, Sumner’s daughter, has been running National Amusements’ theater chain since 1999 and reportedly doesn’t want the property broken up.   Shari views the theater chains as core assets.  Sumner, in contrast, is portrayed as no longer seeing opportunity in the business his father first began.

The WSJ has reported Shari and Sumner were in discussions over Shari trading her 20% stake in National Amusements (and the ownership interest that provides in CBS and Viacom) in exchange for the theaters.  Those talks broke off under pressure from the economy and the debt liability.

Today, there continues to be speculation that Shari might try and buyout at least a portion of the theater properties.  The prospect is relatively slim, however.  She’d need not only Sumner’s consent but a way of servicing the debt – and outside capital is not going to be easy to raise right now.

At some point, the debt (and interest) will be serviced but most likely, a buyer for some of the theaters needs to be found to raise cash.

I wonder if anyone has called Mark Cuban.  His Landmark Theaters company, one of the nation’s largest theater chains dedicated to exhibiting and marketing independent film, might be interested in a select few, especially those already equipped to show 3D films.   … just a thought.

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• Midway’s Troubles Compound as Debt Issues Trigger
•Redstone Bails Out of Midway
• Viacom and CBS Cut, Redstone Sells Some Shares
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