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Redstone may sell movie theaters

November 27, 2008|Meg James | James is a Times staff writer.

Media mogul Sumner Redstone has proposed selling part of his family holding company's movie theater circuit to pare down its debt, according to people close to the situation.

A restructuring plan submitted to bankers this week by Redstone's private holding company, National Amusements Inc., also proposed shedding stakes in the video game company Midway Games Inc. and slot machine maker WMS Industries Inc., according to one person who asked not to be identified because he was not authorized to speak on the record.

"Just selling Midway Games and WMS would not solve all of his problems, and I guess that means tapping into the theater chain," said Harold Vogel, a noted media analyst.

National Amusements has $1.6 billion in debt, including an $800-million bank loan due next month. Determining the value of the 1,500-screen theater chain, which includes the Bridge in Westchester, is difficult. In the past, Redstone has placed the value at more than $1 billion, partly because many of the theaters sit on land owned by the company.

The bulk of National Amusements' theaters are in the Northeast and the Midwest. The company accumulated some of its debt by expanding into Britain, Russia and Latin America. Those foreign theaters could be sold.

Unknown is whether Redstone's daughter, Shari Redstone, supports the plan to carve up the theater chain that she runs. She owns 20% of National Amusements; her father owns 80%.

"At some point, his financial problems become hers," Vogel said.

For now, however, the 85-year-old Redstone has not agreed to relinquish his prized assets: controlling stakes in media companies CBS Corp., which owns the CBS network and Showtime; and Viacom Inc., which owns MTV and Paramount Pictures.

"Those are not on the table," said the person familiar with the proposal.

Last month, Redstone got caught in a credit crunch when turmoil on Wall Street pushed down the value of Viacom's and CBS' stocks. The falling share prices violated debt covenants of National Amusements' loans, and Redstone was forced to sell $233 million in nonvoting shares in the two companies.

Since then, the share prices of Viacom and CBS have plunged further, narrowing Redstone's options.

Some believe the Dec. 19 deadline for National Amusements to pay off the $800 million in bank loans could be pushed into next year. It is neither in the Redstones' nor the banks' interest to sell assets at fire-sale prices, said two people close to the holding company.

In addition, lenders, including Bank of America, are likely to demand some collateral for the loans, which are currently unsecured. National Amusements' shares of CBS and Viacom could be used to securitize the loans.

But not everyone is convinced that Redstone will be able to avoid dipping into his CBS and Viacom holdings to pay down the debt. And some would look forward to that happening.

"Many investors are rooting for more forced sales from National Amusements so that the company's hold on Viacom's voting shares can be loosened," Sanford C. Bernstein media analyst Michael Nathanson said in a report last month.

National Amusements has taken a bath on Midway Games. Redstone invested about $700 million in the Chicago-based company, including snatching up stock when it was trading at more than $22 a share. On Wednesday, Midway's shares closed unchanged at 35 cents. Last week, the New York Stock Exchange notified the game company that its shares might be delisted because its price was too low.

National Amusements also holds about $100 million worth of stock in WMS Industries, which makes slot machines and lottery terminals. WMS shares rose $2.35 to $24.41. The company was founded 65 years ago by Harry Williams, a Stanford engineering graduate who devised the "tilt" mechanism for pinball machines.


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