Redstone
SSumner Redstone, who has long prided himself on his roots in the exhibition biz, is faced with the prospect of ending that long chapter in his career as he looks to unload hundreds of screens in a buyer's market.
The sale talk comes as Redstone's National Amusements, which encompasses a 1,500-screen exhib chain as well as the mogul's majority stakes in Viacom and CBS, confirmed late Friday it has restructured its $1.46 billion in debt.
The restructuring undoubtedly relieves some of the pressure on Viacom and CBS and is a qualified triumph for Redstone. But the impact of the debt episode goes beyond the additional breathing room provided by the revised repayment plan, which extends the deadline to Dec. 31, 2010, with installments along the way.
National Amusements, having struggled for months to keep on top of mounting debt concerns, now needs to sell a chunk of its theater assets to pay down the debt. Under the terms of the restructuring, the company can use asset sale proceeds as well as tax refunds to pay down debt.
The recent fire-sale disposition of Midway Games, Redstone's disastrous vidgame investment, will at least fetch a tax refund in the hundreds of millions that will go toward the debt.
Insiders say the company is hoping to sell U.S. theaters representing several hundred screens. The goal is to raise in the range of $250 million with additional proceeds coming from the sale of theaters in such overseas territories as the U.K., Latin America and Russia.
Movie theaters are essentially real-estate plays with long-term leases and steady, modest margins. In light of that, Redstone couldn't pick a tougher time to get a fair price for parts of the Dedham, Mass.-based circuit, which was founded by his father in 1936.
Redstone recently labeled National as a “billion-dollar asset” but in reality it is worth maybe half that. The bottom has fallen out of commercial real estate markets across the country, so the prices are certain to be well off their recent peaks. And potential buyers in the exhib biz such as Regal and AMC are contending with debt issues of their own.
One key question is whether the Boston-area sites where National Amusements began will be declared off-limits in the sale effort. Redstone and his daughter, Shari, who runs National day to day, have reportedly disagreed about which theaters should be sold.
The debt drama began last fall when Redstone was forced by lenders led by Bank of America to sell about $230 million in non-voting shares in CBS and Viacom after National violated debt covenants.
That stumble by the 85-year-old Redstone, which came as the economic storms began raging, triggered a massive selloff in the shares of Viacom and CBS. It also prompted a wave of speculation about a long-unthinkable scenario: Redstone in danger of losing control of Viacom or CBS.
In the months since, including on a recent Viacom earnings call, the chairman has insisted he would sell no more shares. National received a waiver to skirt a Dec. 19 deadline for an $800 million portion of the debt while talks with banks continued.
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