Waivers for Loews delay bankruptcy

Sony, U mum on lending money to company

And now for something completely different: good news from a movie circuit. Sort of.

Loews Cineplex Entertainment said Thursday that it has won waivers from restrictions on its credit facility to keep the lights on for another 90 days.

There’s no word yet on whether Loews stakeholders Sony and Universal ultimately will kick in some cash to stabilize the circuit for a longer term. But it’s expected the newly won waivers — from debt-to-cash flow mandates and the like — will allow Loews to stay out of bankruptcy court for at least a few months.

“There are no guarantees in life,” cautioned Loews’ strategic planning veep, Mindy Tucker. But she added that a bankruptcy filing is “highly unlikely.”

And though Loews won’t name names, the New York-based company said it’s trying to secure additional equity investment as a longer-term means of solving its problems, which are similar to those roiling the entire exhibition industry. Basically, exhibs have overexpanded into megaplexes while remaining tied to older, unprofitable properties.

Resorting to bankruptcy

Several circuits, including giant Carmike Cinemas, United Artists Theaters and Edwards Theaters, recently resorted to bankruptcy reorganization to sort out their difficulties. Most notably, the Chapter 11 filings are expected to free the circuits from onerous lease contracts on theaters.

Loews had warned last month that its second-quarter revenue would be down and its quarterly loss would be wider than a year ago because of “disappointing performance of product” during summer months. The developments had meant the circuit would need to seek waivers of the sort now won.

“The company at any time still could choose to go into bankruptcy,” said analyst David Londoner of the ABN AMRO investment firm in New York. “But today’s action kind of implies that Loews’ banks are willing to live with promises that Sony or Universal may put some money into it if necessary.”

Big name investors

Loews’ Tucker said the current talks involve potential investors other than those studios. But she acknowledged that Sony and U are “intimately involved” in the company.

“I think there is a perception that we have parents with deep pockets who won’t let us go into bankruptcy,” the Loews spokeswoman said. “But they have not promised to lend any money to the company.”

Sony Corp. of America chief Howard Stringer and Sony Pictures Entertainment co-prexy Mel Harris are among six Sony reps on the Loews board, and U president Ron Meyer is among four U execs on the board.

Sony holds a 40% Loews stake, and U has a 25.5% interest.

Loews operates 2,960 screens in 376 locations, mostly located big cities in the U.S., Canada, Europe and Asia. Its shares closed down 6 cents at $1.69 on Thursday.

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