Regal nears the brink

Theater chain following exhib trend with financial woes

HOLLYWOOD — Exhibition titan Regal Cinemas has lurched closer to the brink of bankruptcy after its latest interest payment was blocked by creditors.

Friday’s blockage of the semiannual $28.5 million payment resulted from the company’s deteriorating financial condition, a Regal spokesman said. Creditors found Regal had violated its covenants with them by failing to maintain certain debt ratios.

Regal, the largest U.S. theater circuit, has about 4,400 screens and carries a long-term debt load of about $1.8 billion.

“While the payment blockage was not the company’s decision,” said chairman and CEO Michael Campbell, “we anticipate that we will continue to maintain existing payment terms and remain current with our vendors while the company explores various strategic restructuring alternatives.”

In a statement, the company said that bank lenders now have “the right to accelerate the maturity of the company’s debt obligations.” It added that “if any of these obligations are accelerated, the company … may be forced to seek protection under federal bankruptcy laws.”

Go-go megaplexing

The debt-riddled exhib biz has seen Chapter 11 filings recently by United Artists, Edwards, General Cinemas and Carmike. But more than any of its rivals, Knoxville, Tenn.-based Regal has come to symbolize the downside of 1990s go-go megaplexing. Nearly half of the 11-year-old circuit’s screens were built after 1997.

In 1998, the leveraged buyout firms Hicks, Muse, Tate & Furst and Kohlberg Kravis Roberts each took 46.1% stakes in Regal and helped engineer the acquisition of top circuit Act III. That capped an acquisition binge that left the fast-growth circuit with a raft of underperforming locations, many observers contend.

Dick Westerling, senior veep of marketing and advertising, stressed that Friday’s announcement should not be interpreted as a negative statement about Regal’s cash reserves.

“This is not a liquidity issue,” he said. “The company has sufficient cash to maintain our obligations to our studio partners.”

Restructuring explored

Financial advisers Jay Alix & Associates and Houlihan, Lokey, Howard & Zukin were hired recently to help Regal explore various restructuring options. Possibilities include sale of nonstrategic assets, recapitalization, reorganization or closure of underperforming theaters.

The latter option would set the stage for one of the most striking spectacles of the recent exhibition debacle: the padlocking of many sparkling, 20-screen movie palaces just a couple of years after they opened.

(Jill Goldsmith in New York contributed to this report.)

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