Lenders to amend terms of revolving credit facility
Lionsgate’s lenders have helped the minimajor step back from a potential debt default in the face of Carl Icahn’s hostile takeover attempt.
In a brief announcement Tuesday, Lionsgate disclosed that senior lenders had agreed to amend terms of the revolving credit facility, less than a week after Icahn increased his stake in the company to 31.8% through his tender offer.
Icahn’s move had placed Lionsgate in the position of a possible default of its $340 million revolving credit line. He had only needed 20% to trigger that provision but the minimajor announced Tuesday that the syndicate led by J.P. Morgan Chase had amended the “change of control” provisions so that the “trigger threshold” of ownership by a single shareholder has risen to 50%.
Icahn, now Lionsgate’s largest shareholder, had been blasting the company for being in the position of a possible default and had warned that it could wind up in bankruptcy. Lionsgate had responded last week by saying it was “confident” that it could persuade the lenders to alter the provision.
The company also noted Tuesday that the credit facility continues to carry a “favorable” interest rate of the London Interbank Interest Rate plus 2.5%. “Other key financial terms and provisions remain unchanged,” Lionsgate added in a statement.
Shareholders can tender their shares to Icahn’s $7-a-share offer until June 30.
Lionsgate shares were off a penny to $7 on the New York Stock Exchange. Shares have gained more than 20% this year.
Icahn promised in early June that he’d launch a proxy fight, blasting the board’s support for management and accusing Lionsgate of overspending and failure to adjust to changing circumstances. Lionsgate has asserted that Icahn’s hostile bid is a lowball offer that ignores improvements in the mini-major’s performance.
Vancouver-based Lionsgate usually holds its annual shareholders meeting in September in Toronto during the film festival. But Icahn has suggested that the meeting be held as soon as possible.