Exhibition in need

Debt-ridden movie circuits face bargain hunters

With debt-pummeled exhibitors easy pickings for bargain-minded investors, a handful of movie circuits soon could have new owners.

Philip Anschutz, sports entrepreneur-turned-entertainment titan who snapped up United Artists Theatres Circuit in bankruptcy court, is part of a group that has bought Regal Cinema’s bank debt. Anschutz is partnered with vulture fund Oaktree Capital, also circling the troubled Silver Cinemas chain, and the move on Regal debt could give Anschutz ownership control if Regal enters bankruptcy reorganization as expected.

Meanwhile, there’s gathering speculation that Newport Beach, Calif.-based Edwards Theaters, which entered bankruptcy reorg proceedings in August, also could get snapped up by an enterprising investor. Century Theatres, a regional circuit based in Marin County, is one likely suitor.

“We would absolutely be interested in purchasing certain assets of Edwards Theaters,” Century chief Raymond Syufy said.

But it’s too early to tell if the company or its creditors would be willing to sell individual pieces of the company, and Century won’t bid on the entire circuit, Syufy added.

Loews bankruptcy

On yet another front, there’s talk that Loews Cineplex — the second-biggest U.S. circuit after Regal — has decided on a bankruptcy reorg for its Canadian unit, Cineplex Odeon, though not for its U.S. exhib operations for the present.

“We’re in discussions with banks and bondholders working out a financial restructuring,” Loews spokeswoman Mindy Tucker said.

She declined comment on the details of a final agreement.

Loews has a waiver from certain loan covenants involving debt-to-cash ratios until Jan. 26.

Regal chairman Mike Campbell confirmed Wednesday that Anschutz and Oaktree had acquired a “significant portion” of the circuit.

Added Campbell: “Our management team is in contact with representatives of the groups, and as we move forward, we will continue to evaluate the various restructuring alternatives available to our company. We believe that the presence of the Anschutz and Oaktree groups will enhance our ability to complete our restructuring and move forward with the management of our business.”

WSJ report

The Wall Street Journal said Wednesday that Anschutz and Oaktree have bought some $350 million of Regal’s $1 billion in syndicated bank loans, with Anschutz getting 80% of the distressed debt at under 75¢ on the dollar and Oaktree acquiring the balance at a similar discount.

The moves follow Anschutz’s acquisition of UA debt — and effectively the circuit — last fall. They also mirror Oaktree’s more recent purchase of roughly 57% of the $100 million in unsecured distressed debt at Silver, parent company to the Landmark Theatres arthouse circuit and assorted discount theaters.

In the Silver situation, current owners have been conducting a formal auction of assets, as the Dallas-based company slogs through bankruptcy reorg in U.S. District Court in Wilmington, Del. A pair of lenders holding some $32 million in collateralized Silver debt — Foothill Capital and Cerberus Partners — are considered the lead suitors in that auction.

But Silver’s bidding process was extended until Jan. 25 on Tuesday to allow for talks between Oaktree and the collateralized lenders. Foothill and Cerberus are mulling whether to let Oaktree join their bid, effectively cashing them out or at least taking over majority control of Silver.

Silver buyer still possible

There’s still the chance a strategic buyer for Silver could surface, with Gotham film producer-distributor Madstone Films believed to be considering an offer. If one or more of its lenders end up owning Silver, that would represent only an interim arrangement until market conditions flush out more interest from a longer-term buyer for the circuit.

In the Regal situation, Anschutz and Oaktree would be well-positioned to snap up the company if the exhibitor enters Chapter 11 proceedings. That would crown Anschutz the king of U.S. exhibition, a business he held no role in less than a year ago.

Anschutz-controlled UATC operates roughly 1,600 screens, and Regal would give him more than 4,000 more. Though a couple more shoes would have to drop before that scenario comes to pass, it’s interesting to note the current situation represents the second time UA and Regal have been positioned for a possible combo.

Regal owners Kohlberg Kravis Roberts and Hicks, Muse, Tate & Furst jointly bought Regal in 1998 for more than $1 billion plus debt assumption. The investment firms had said they planned to combine Regal with UATC, which Hicks had a deal to acquire separately, but the plans collapsed when Hicks terminated the UA purchase agreement amid reports of fiscal woes at the circuit.

Since then, most of the exhibition industry has been socked with similar financial problems, caused by heavy debt piled on during a multiplex-building binge. Early to suffer problems, UATC now is completing a major restructuring of its company even as exhibitors such as Regal consider how to tackle their problems.

United Artists topper Kurt Hall called Anschutz “extraordinarily helpful in our restructuring.” But Hall declined to discuss how Anschutz — a famously press-averse billionaire — might proceed in converting his Regal debt holdings to an ownership stake in the circuit.

At UATC, debt ultimately was converted into equity as part of the company’s Chapter 11 proceedings.