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Bankruptcy Judge Lets Edwards Keep Running in Reorganization

Theaters: The ruling comes as Loews Cineplex, the nation's No. 2 chain, is latest operator to reveal mounting losses and risk of default.

August 26, 2000|LESLIE EARNEST and MARC BALLON | TIMES STAFF WRITERS

A bankruptcy judge cleared the way Friday for Edwards Theatres Circuit Inc. to continue operating its cinemas as it moves through early stages of a bankruptcy reorganization.

The ruling, which allows the Newport Beach chain to spend money to run the business, came as yet another major theater operator disclosed mounting financial problems.

Loews Cineplex Entertainment Corp., the nation's second-largest theater company, said Friday that its losses are increasing and that it could default on certain bank loans by the end of the month. Loews has 2,967 screens in 385 locations in the U.S., Canada and Europe, about four times as many screens as Edwards.

Loews Chief Executive Lawrence J. Ruisi blamed such factors as "continued decay at our older theaters that are experiencing competition from newer megaplexes"--one of the problems that Edwards cited in its bankruptcy filing. Loews also blamed a slow summer movie season.

Ruisi said his company was negotiating with its bankers for breathing room and looking for outside investors to rescue it.

The theater industry is reeling under a massive financial strain caused by a five-year building binge during which exhibitors were expanding and building large modern theaters. In addition to the debt the exhibitors accumulated, they also found that earnings were drained by older, smaller theaters that customers began rejecting in favor of the grander megaplexes.

Other theater operators to file bankruptcy recently include No. 3 Carmike Cinemas Inc. and Silver Cinemas, the nation's largest art film exhibitor. Regal Cinemas Inc., the No. 1 operator, reportedly has been negotiating with its bankers to avoid breaching loan covenants.

Edwards filed for Chapter 11 bankruptcy protection on Wednesday, saying it needed to restructure its debt and operations. The company said it would do business as usual during the reorganization.

But to do so, it needed to go to court because a group of financial institutions led by Bank of America has a lien on a variety of assets, including even the snacks the exhibitor sells at its concession stands.

Bankruptcy Judge Lynne Riddle's ruling, for example, allows Edwards to sell its popcorn and use the cash to buy more concessions. The ruling is effective through Sept. 11, but could be extended or modified.

At the time of the bankruptcy filing, Edwards and its affiliates owed approximately $215 million to the bank group, according to Edwards' bankruptcy petition.

On Thursday, Riddle approved the company's request to terminate 28 movie house leases. Among the theaters Edwards planned to shed are the Woodbridge 5 in Irvine and Lido in Newport Beach, which continue to operate pending further negotiations.

In its bankruptcy petition, Edwards said it was facing a deadline at the end of August to pay bank lenders about $15 million in principal and interest payments, and probably would have still been in default on various loan agreements after that.

The chain expects to emerge from bankruptcy as a leaner entity of about 60 theaters, mostly in Southern California, said Eric Goldberg, an attorney for Edwards. However, he added that Edwards might consider selling the company at the right price.

"'We're not ruling anything out," Goldberg said.

*

Times staff writer E. Scott Reckard and Reuters contributed to this report.

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