Financially ailing Cannon Group acknowledged Friday that a Spanish company that promised to pay $300 million for Cannon's real estate has encountered a delay in raising a significant portion of the money.
However, Cannon said it was able to pay bondholders $11.7 million in interest that was nearly one month overdue. In addition, the entertainment and film company paid $110,000 "in interest on the interest to the bondholders," said Steven Kaffen, Cannon's vice president of finance.
The money for the interest payment was provided by Credit Lyonnais Bank Nederland from the company's account, "but done with a guarantee of something from Interpart," said Frederic G. E. Scheer, Cannon's chief financial officer since August. Interpart S.A. is a Luxembourg company that began investing in Cannon last May.
Interpart is also the majority shareholder of Renta Inmobiliaria, the Spanish company that agreed last month to acquire Cannon's real estate for $300 million.
Scheer, who is an Interpart officer, said he did not learn until Friday afternoon that Renta has postponed its public offering to raise $140 million from investors in Spain. The delay was blamed on market uncertainties created after stock values plummeted in the United States on Oct. 19.
Scheer insisted, however, that Cannon is not alarmed by the postponement because Renta has a contract with an underwriter to "guarantee the placement of the shares. . . . We are absolutely sure we will have the money because of the contract. It's only a question of timing," he said. Scheer said Renta ranks as one of the 25 largest companies traded on the Spanish exchange.
About two-thirds of the proceeds from the real estate sale will go to repay Cannon's bank debt, Scheer said. He estimated that about $100 million might be received as soon as the end of November or beginning of December for Cannon's U.S. properties.
Cannon's 12-member board of directors is expected to meet in the coming week, but no precise date has been set, Scheer said.
Earlier this week, Cannon and three of its current or former officers agreed to a settlement with the Securities and Exchange Commission without admitting or denying charges that they violated anti-fraud provisions of the federal securities laws. The settlement ended a 14-month investigation into the company's financial affairs.