A group of unsecured creditors of Loews Cineplex is trying to elbow back to the table in a bankruptcy reorg of the giant exhib.
The unsecured creditors are asking a bankruptcy court judge to end the company’s exclusive right to put forth a reorg plan. They based that request in part on the argument that company co-owner Sony improperly saddled Loews with costs of reducing Sony’s holdings in the circuit during a 1998 merger of the Loews and Cineplex Odeon chains.
Among the unsecured lenders are beverage giant Coca-Cola, real estate developers Simon Properties and J.D. Carlisle, HSBC Bank and various exhib suppliers, including Fast Food Merchant.
Sony currently holds a 40% stake in Loews Cineplex; Universal Studios is the next biggest shareholder with about a 26% stake. Both studio parents would lose all equity in the circuit under a reorg plan advanced by Loews.
However, the financial impact on Sony would be minimal, largely because the studio parent received a $417 million cash payment when Loews merged with Cineplex Odeon (Daily Variety, Feb. 16). The unsecured creditors say that payment left Loews overly laden with debt.
Under Loews’ own reorg plan — for which it has filed a letter of intent but still must present a detail description — 88% of the circuit’s equity would be acquired by an investment group led by Canadian businessman Gerald Schwartz. Other members of the investment group include Pacific Capital investment firm,controlled by fiber-optics entrepreneur Gary Winnick, and L.A.-based vulture fund Oaktree Capital.
Also under the company reorg plan, unsecured creditors would get a block of Loews shares representing an effective 12% stake in the company and warrants to acquire another 5% interest. But the value of those shares would pale in comparison with the more than $400 million in unsecured claims and loans the group currently holds.
The unsecured creditors group argues it should be able to advance a reorg plan of its own. It’s expected such an alternative plan would compensate the unsecured creditors far better than the company-advanced plan.
A Loews spokeswoman declined comment on the matter, which will be argued in U.S. Bankruptcy Court in New York on June 1.
A Sony spokesman said, “Because this is potentially a legal matter, it is inappropriate for us to comment at this time.”