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Carl Icahn takes shot at Lionsgate

Questions if minimajor can meet its obligations

In the latest PR move in the battle for control of Lionsgate, Carl Icahn has shot back at the minimajor for urging debtholders to be cautious before they agree to sell to Icahn.

Icahn, who’s offered to buy up to $350 million of convertible debt, issued a press release Monday in which he questioned whether Lionsgate can meet its obligations if its $340 million revolving credit facility fell into default due to a change of control. “The company failes to communicate whether its current liquidity position would be sufficient to meet such obligations,” Icahn said.

Lionsgate had no comment Monday. It announced last week it was neutral over Icahn’s debt offer but also noted its board had “strongly urged” debt holders to consider several risk factors before agreeing to sell to Icahn, whose offer expires April 20.

Icahn said in Monday announcement that if a shareholder’s stake tops 20%, Lionsgate could face accelerated payment obligations on $325 million in debt and whatever has been drawn on the credit line.

“If this occurred, the company would face either a refinancing or a restructuring,” Icahn said. “Because any consideration of refinancing must take into account the difficult state of the current credit markets, one is left to speculate how the company would meet this demand without restructuring?”

Icahn currently owns 14.5% of the stock. Mark Rachesky, a former Icahn associate who supports management, recently increased his holding to just short of 20%.

Icahn also said if Lionsgate is forced to equity would end up being owned by debt holders and that the library would provide noteholders “full recovery value if managed properly.”

“The other noteholders, when considering my tender, should ask themselves whether or not they believe the same.”

Lionsgate cut 8% of its staff last week, trimming the number of job slots by 45 to about 500 in the second round of work force reductions aimed at generating $15 million to $20 million in annual savings. The job cuts will leave annual operating costs at about $120 million.

Talks between Icahn and Lionsgate about the billionaire obtaining board seats collapsed earlier this month, leading to Icahn making the offer for $350 million of debt.

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