Savoy debt swapped

The largest shareholder in Savoy Pictures Entertainment Inc. swapped a huge chunk of debt for equity, a sign of faith that the young film company’s stock will climb as it matures.

Separately, Savoy reported its first-ever revenues in the fourth quarter and posted an expected loss for the quarter and the year.

The shareholder, GKH Partners L.P., agreed to trade into stock a $ 12.5 million note that was earning 18%.

The balance on the note, which accrued annually but is not paid until it matured in February 1997, topped $ 17 million. At maturity, it would have been $ 28.6 million.

By exchanging the debt for equity, Savoy said it will save $ 3.1 million in pretax interest this year, $ 3.6 million next year and roughly $ 5 million a year in 1996 and 1997.

“What we’ve done is eliminate a $ 28 million liability,” said Lewis Korman, Savoy prexy and chief operating officer. “It really strengthens our balance sheet further.”

In exchange for giving up the debt, GKH gets about 1.1 million Savoy shares, about 175,000 more shares than it would have received had it converted its existing note. The partnership also picked up a five-year warrant to buy 250,000 more shares for $ 25 apiece. Savoy also paid GKH $ 470,000 and agreed to amend a separate GKH note, that pays 12%, to make it directly convertible into nearly 1 million shares.

GKH is a partnership that includes the wealthy Pritzker family from Chicago and Dan Lufkin, a founder of Donaldson Lufkin & Jenrette Securities Corp., the New York investment bank.

For the quarter, Savoy lost $ 8.1 million (40 cents), compared to net income of $ 73,000 (0 cents) in the like period a year ago. Revenue was $ 7.1 million. Since Savoy’s first-ever revenue came in the fourth quarter from the release of “A Bronx Tale” and the first few days of “Shadowlands,” it has no revenue for the comparable period a year ago.

For the year, the company lost $ 12.5 million (71 cents), compared to income of $ 902,000 (6 cents) in 1992.

Korman said the results reflect expected initial costs and slight sales of a start-up company.

“They’re really not meaningful numbers,” Korman said.

Savoy’s stock closed Thursday at $ 17.50, down 25 cents in Nasdaq trading.

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