Sumner Redstone could soon learn whether the fire sale of much of his family's movie theater chain will raise enough cash to make a looming debt payment -- or force him to resort to a Plan B to salvage his shrinking media empire.
Bids for the U.S. theaters owned by Redstone's family firm, National Amusements Inc., are due Tuesday and offers for its British cinemas are expected next week, according to people familiar with the auction who asked not to be identified because the sales process is supposed to be confidential.
The 86-year-old media mogul must come up with $500 million by October to help pay down his firm's $1.46-billion debt or find himself in default and at the mercy of his lenders. If he doesn't raise enough money from the auction, he could be forced to unload more stock in the media companies that he controls through National, Viacom Inc., which owns Paramount Pictures, MTV and Nickelodeon, and broadcast giant CBS Corp.
Wall Street will be looking to an update on the auction when Viacom announces its earnings Tuesday. CBS releases its results next week.
"For the stability of the empire that Sumner Redstone has spent his life building, he must successfully deal with National Amusements' near-term debt maturity," said media analyst Laura Martin of Soleil Securities.
Redstone has been struggling to pare National Amusements' huge debt since last fall, when shares of Viacom and CBS fell as the stock market plummeted, causing National to violate debt covenants and forcing Redstone to sell shares in the two media companies. The sale further drove down the value of Viacom and CBS. In November, he dumped his stake in video game maker Midway Games for a mere $100,000 -- taking a tax write-off of nearly $800 million.
National received a reprieve earlier this year from its lenders. The banks restructured Redstone's debt, spreading the payments over two years to give Redstone time for an orderly sell-off of assets. Since then, Redstone's position has improved slightly as both Viacom and CBS have gained value in the rising stock market.
Redstone's plan is to bring National's debt load to less than $1 billion, then refinance the remaining portion, according to people close to him. That would ease the pressure to shed more assets -- which he is loath to do, particularly his prized Viacom.
