Loews in a state of grace

Banks give exhib breathing room with debt

By JILL GOLDSMITH

Loews Cineplex Entertainment said bank lenders have agreed to a grace period through Jan. 26 for the troubled exhib to comply with certain financial covenants under its loan agreement. The banks will also give Loews access to limited funds under its credit facility so it can keep its business running until then.

The waiver was extended from Friday.

Loews is providing additional collateral and will continue discussions with its lending group and other involved parties to address its long-term liquidity troubles beyond this period. If talks break down and the banks call in their loans, Loews said it may have to file for Chapter 11 bankruptcy, which a number of its competitors have done.

Gotham-based Loews has maintained privately that will not seek bankruptcy protection, although some industry players think it may have no choice. Moody's Investor Services lowered the company's credit rating last week citing fears that it might default on an interest payment due to bondholders early next year.

Meanwhile, Standard & Poor's knocked Regal Cinemas' corporate credit and subordinated debt ratings down to "D," for default, after senior lenders blocked the nation's biggest circuit from making a payment to bondholders.

Carmike Cinemas, United Artist Theaters, General Cinemas and a handful of other circuits have tumbled into an unprecedented stream of Chapter 11 filings over the past year and a half. The industry spent too much on new theaters that eroded attendance at older locations much faster than expected. The new builds didn't all live up to expectations; a disappointing summer box office exacerbated the misery.

Loews is the nation's largest publicly traded exhib. Shares of the company fell 12.5% Friday to close at 44¢ -- making it a penny stock.

Regal, of Knoxville, Tenn., failed to make a $28.5 million semiannual interest payment. The S&P said Regal's lenders could block payment for up to 179 days, but bondholders have a right to declare the company in default after 30 days and speed up repayment.

Although Regal, which has a $1 billion debt load, remains current on another subordinated note issue, S&P said, a payment is due Dec. 15 and will probably be blocked as well. Regal, which is owned by investment firms Kohlberg Kravis Roberts & Co. and Hicks, Muse Tate & Furst, has said it may seek bankruptcy protection, but will keep paying vendors as it explores its options.

The company has public debt but no publicly traded stock.