Billionaire Sumner Redstone is breathing easier.
Although the 86-year-old media mogul faces a $500-million debt payment in the next two weeks, substantial gains recently in the value of his family's shares in Viacom Inc. and CBS Corp. have given Redstone some badly needed leverage with his lenders.
Redstone's privately held family holding company, National Amusements Inc., had planned to sell most if not all of its theater circuit to cover the looming debt payment. But with an improvement in his financial position as well as a loosening of the credit markets, Redstone has decided to hold on to the cinemas -- at least for now -- and thus avoids a fire sale of those assets at the bottom of the market, according to people close to Redstone.
Many of National Amusements' 118 theaters sit on valuable property, but Redstone's plans to auction them off came as the commercial real estate market began to tumble. Some likely buyers, including other theater owners, have been saddled with their own debt and not in a position to make a big acquisition.
Redstone had received bids for the theaters, according to people familiar with the auction who asked not to be identified because the talks are private.
But apparently none of the offers was high enough to compel Redstone to wrap up a quick deal -- particularly if he wasn't under pressure from his bankers to shed assets.
In the last seven months, shares of Viacom, which owns MTV Networks, Nickelodeon and Paramount Pictures, have more than doubled in value, closing Tuesday at $28.70 a share.
During the same period, the price of CBS stock has tripled, closing Tuesday at $12.15 a share. CBS has benefited from a slight upturn in the advertising market and a strong start to the fall TV season, thanks to such shows as "The Big Bang Theory," "NCIS" and the latest hit, "NCIS Los Angeles."
"The pressure has certainly eased given the dramatic rise in the value of CBS and Viacom stock and the overall health of the credit markets," said Rich Greenfield, media analyst with Pali Capital. "The credit markets have thawed considerably in the last three months."
A year ago, the picture was much bleaker for Redstone.
When the financial markets collapsed in the fall of 2008, the value of CBS and Viacom plummeted, triggering a violation of National Amusements' covenants on $1.6 billion in debt.
