Loews Cineplex, whose owners include Sony Pictures and Universal Studios, has been blocked from making a key interest payment that some observers say could push the struggling exhibitor into bankruptcy court.
The New York-based company said Thursday that lenders have prohibited its making $13.3 million in payments due holders of senior notes for up to 179 days. The action was taken because Loews violated a loan covenant regarding debt-to-cash ratios.
Last week, Loews revealed plans to close 112 theaters, or one-fourth of its circuit, to save cash for continuing operations. And on Thursday, the company said it continues to talk to lenders about restructuring debt to make it more manageable.
But exhib acknowledged the latest developments mean lenders might accelerate the maturity of its debt, and that could prompt a Chapter 11 bankruptcy reorg.
“That might be the only way to sort things out,” said analyst Jeffrey Logsdon of Gerard Klauer Mattison & Co. in Los Angeles.
Others believed talks still could produce an out-of-court restructuring.
“I still think there’s a chance the bankruptcy won’t happen,” said analyst David Davis of Houlihan, Lokey, Howard & Zukin in Los Angeles.
The latest developments at Loews came after the close of market trading. Loews shares, which have fallen 87% in the past year, closed unchanged Thursday at 60 cents.