Creditors have approved a reorganization plan that would give a group led by entertainment entrepreneur Philip Anschutz a 51% stake in Edwards Theaters, a Newport Beach-based circuit of 600-plus screens whose acquisition will bring Anschutz’s exhib holdings to 2,200 screens.
It’s now considered all but certain that a bankruptcy judge will approve the group’s proposed restructuring of the family-owned chain at a confirmation hearing Sept. 19. Anschutz is partnering with the Oaktree capital buyout firm in the Edwards takeover.
Separately, wrangling over the Anschutz-Oaktree group’s proposed takeover of exhib Regal Cinemas appears likely to drag on at least another couple of weeks. Gaining Regal’s 4,300 screens would give Anschutz control of roughly 6,500 screens, or almost one-fifth of the nation’s exhibition industry.
But for now, approval of the group’s majority takeover of Edwards was required from creditors holding two-thirds of the total amount of voting-class debt, and from half of the total number of individual creditors. Insiders said a tabulation of creditors’ votes showed the plan succeeding on both measures by a 4 p.m. Tuesday deadline.
“Each class of creditors has voted to approve the plan,” Edwards spokeswoman Anita Marie Hill said.
Anschutz and Oaktree will pay $56 million for their majority stake, with the family of chairman and CEO Jim Edwards retaining 49%. Edwards’ bank debt will be largely converted to equity through the transaction, with roughly $9 million in subordinated notes to remain on the company’s books.
Management of the circuit remains in flux. Edwards is expected to retain some sort of exec title, but a new board chairman is likely to be installed soon.
Like the 10 other major circuits which have filed for bankruptcy over the past couple years, Edwards’ woes are traceable to an industrywide megaplex building binge that piled exhibs high with debt and created cutthroat competish among the various U.S. circuits. In the case of Edwards, many observers say the chain was overaggressive in building in its own backyard, with its new megaplexes cannibalizing its other theaters in Edwards’ core Southern California region.
“Edwards has been particularly strong in Orange County historically,” noted analyst Arthur Rockwell of Rockwell Capital Management in Los Angeles.
Anschutz and Oaktree are also active in several other exhib restructurings, both separately and in cooperative ventures.
Separately, Anschutz already has acquired a controlling interest in the nearly 1,600-screen United Artists Theater Circuit, and together with Oaktree has snapped up a controlling share of both the subordinated and bank debt of Regal Cinemas. The struggling chain long has been considered a wobbly couple of steps away from bankruptcy court, but months of negotiations over a proposed Anschutz-led restructuring still have failed to crystallize any one of three prospective scenarios regarding a Chapter 11 filing.
One scenario would see Regal management cooperate with the Anschutz-Oaktree group in a prepackaged bankruptcy filing. But even if consensus is reached on pursuing that option, it likely would take up to another month to come together as support among other creditors is sought prior to a filing.
Another option would see Anschutz and Oaktree force an involuntary bankruptcy reorganization, using the group’s hold on Regal debt to accelerate a filing. It’s not clear how close the Anschutz camp may be to exercising such a strategy.
Yet another scenario would see the investment firms that currently own Regal — Hicks, Muse, Tate & Furst and Kohlberg Kravis Roberts — file voluntarily for bankruptcy reorganization to advance their own proposal for revitalizing the struggling circuit. But it’s considered a long shot that the usually savvy buyout firms would throw still more capital at a situation that’s already cost each hundreds of millions of dollars in bad investments.
Meanwhile, Oaktree separately has won control of the Landmark arthouse chain and its Silver Cinemas parent. The Los Angeles-based firm is also partnered with Canadian conglom Onex on takeover bids involving Loews Cineplex and General Cinemas.
The Loews proposal remains bogged down in haggling over details of the partners’ proposed takeover of the chain. Negotiations continue between the Onex-Oaktree group and Loews creditors, whom the prospective circuit buyers need to win to their cause.
The General Cinemas situation has advanced to a full-blown auction with a Sept. 5 deadline for final bids. AMC Entertainment, one of the nation’s healthier exhibs at present, was top bidder in a preliminary round of nonbinding offers.
“It looks like we’re getting down to two players in the industry — Anschutz and AMC,” analyst Rockwell observed.