Exhibiting contrast

Chains witness ups vs. downs of bankruptcy

Two exhib stocks have headed in opposite directions in recent market trading, with both Carmike’s climb and General Cinemas’ fall tied to the respective circuits’ ongoing bankruptcy reorgs.

Carmike recently advanced a restructuring plan marked by attractive terms for existing investors and increased backing from a blue-chip investment bank. As a result, its share price has marked successive new 52-week highs in recent trading, though Wednesday some profit-taking prompted a 2¢ downtick to $1.50.

By contrast, General Cinemas’ parent GC Cos. has watched its shares slide ever downward, well into penny-stock levels. GC shares plunged another 10¢, or 22%, to 35¢ on Wednesday.

Carmike, which aims to emerge from its reorg with 2,200 screens nationwide, late last month filed a plan to restructure more than $600 million in current debt. Under the proposal, Goldman Sachs would gain a 40% stake in the Columbus, Ga.-based circuit and existing shareholders would come away with a collective 22% interest.

Though current shareholders thus would see something of a squeeze under the plan, the terms still rep a considerably better treatment of equity holders than has been the case in most other recent exhib reorgs. If its plan is approved, Carmike estimates it could emerge from bankruptcy court proceedings within the next few months.

Meanwhile, Chestnut Hill, Mass.-based GC continues to grapple with an auction of its assets in Chapter 11 proceedings, currently under way in the same U.S. Bankruptcy Court in Wilmington, Del., that’s handling the Carmike case. A GC creditors committee has decided the best way to maximize payment on what’s owed them would be to sell the company to a highest bidder.

But those involved in the GC auction have decried a decided lack of information about how the bidding process is being conducted or its anticipated timeline. Though at least three bids have been advanced for the company (Daily Variety, Sept. 5), the business has yet to publicly acknowledge any offers or to say what the next round in the process will be and when.

“It’s keeping me from coming across with my best bid,” said a chief exec at one company that’s filed an initial bid for General Cinemas’ 677 screens. “As it is, it’s not clear enough that I wouldn’t be simply bidding against myself.”

It’s known that one of the bids involves a partnership of Canadian conglom Onex, Los Angeles buyout firm Oaktree Capital and Kerry Packer’s Aussie-based Consolidated Press Holdings.

Consolidated also owns the Hoyts Cinemas circuit, whose U.S. operations include a substantial Northeast presence and which operates some South American theaters in a joint venture with GC. It’s believed that Dallas-based Cinemark also has placed a bid, but that offer appears to be only for GC’s international theaters.

AMC Entertainment, backed by majority shareholder Apollo Management, is rumored to be high bidder in the GC auction so far.

But it’s often true that precise terms of acquisitions are as important to various classes of creditors as the overall value of a deal, and it’s also important how management is treated in various takeover scenarios. Also, even AMC execs say they aren’t sure the rumor about their being top bidder is true.

Century Theaters is partnering with Muvico on yet another bid for General Cinemas. It’s likely the bidding partners would divide circuit assets between them if successful in the GC auction.

Separately Wednesday, regional exhib CinemaStar Luxury Theaters announced that U.S. Bankruptcy Court in San Diego has confirmed its reorg plan.

CinemaStar has proposed giving unsecured creditors a choice between taking a one-time payment equal to 65% of their claims or a promissory note equal to 100% of claims. Equity holders have an option of being cashed out of their shares or being included in a plan that would see their publicly traded stock converted to new private shares in the company.

Carmike, GC and CinemaStar are among about a dozen U.S. circuits filing for bankruptcy reorgs over the past two years. The actions were triggered by an industrywide financial crisis of historic proportions, caused by a megaplex-building binge that piled exhibs high with debt and set loose dramatically heightened turf warfare among the various chains.

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