NEW YORK (Reuters) - Loews Cineplex Entertainment Corp.,
the No. 2 U.S. movie theater operator, said on Friday it
expects to default under a bank loan by the end of August, and
warned it will lose money in the quarter ending August 31.
The New York-based company, whose theaters are primarily in
major U.S., Canadian and European cities, also said it expects
revenue and earnings before interest, taxes, depreciation and
amortization (EBITDA) for the quarter ending August 31 to be
''considerably lower'' than they were a year ago.
Loews (LCP.N), which operates 2,967 screens in 385 theaters
under the Loews, Sony, Cineplex Odeon and Europlex names and is
the largest publicly traded theater chain, said it will have to
renegotiate credit terms or obtain a waiver.
It also said it was looking at selling and leasing back
theaters, and obtaining equity infusions.
The company is one of several large theater operators in
trouble from having taken on substantial debt to build costly
megaplexes with stadium seating, and failing to close or
renegotiate leases for enough older, underperforming theaters.
At the same time, bank lenders have tightened their credit
standards, making it more difficult for the operators to obtain
new cash or refinance existing debt. Softening summer box
office receipts have also not helped, analysts have said.
``This is mass suicide,'' said Sean Egan, managing director
of Egan-Jones Ratings Co. in Philadelphia. ``You have three or
four major companies suffering from the urge to build
stadium-style megaplexes, but it cannibalized their existing
facilities. The capital expenditures are eating them alive.''
Loews' stock closed unchanged Friday at 2-15/16 on the New
York Stock Exchange. It has fallen 50 percent this year.
In a statement released after the market close, Chief
Executive Lawrence Ruisi attributed the revenue and cash flow
shortfall to ``disappointing'' summer performance, ``continued
decay'' at older theaters facing competition from the megaplexes
and ``unfavorable product allocation'' at Canadian theaters.
Loews said it ``expects that the net loss for the quarter
ended August 31, 2000 will be greater than the net loss which
occurred in the prior year period.''
In its most recent quarter, which ended May 31, Loews
reported a net loss of $31.5 million, or 54 cents a share, on
revenue of $205.3 million. For the year ending February 28, it
reported a net loss of $51.4 million, or 88 cents a share, on
revenue of $930.4 million.
For the quarter ending last Aug. 31, Loews reported net
income of $15.9 million, or 27 cents per share, on revenue of
The company was not available for further comment.
On August 4, credit rating agency Standard & Poor's warned
it may cut its ratings for Loews by one or two notches in light
of the company's ``weak credit measures'' and the ``difficult
operating environment'' for theater operators in general.
Analysts have said theater operators should close as many
as 12,000 of the more than 37,000 screens in the United States,
and expect industry consolidation in the next couple of years.
Earlier this month, Carmike Cinemas Inc. (CKE.N), the No. 3
theater operator, filed for bankruptcy protection, and No. 1
operator Regal Cinemas Inc. said it was seeking relief from
Denver billionaire Philip Anschutz is close to taking over
another operator, United Artists Theater Co., as part of a
prepackaged bankruptcy reorganization next month, The Wall
Street Journal reported on Friday.
S&P rates Loews' subordinated debt ``single-B,'' its fifth
highest junk grade. Another agency, Moody's Investors Service,
rates it ``Caa2,'' roughly three notches lower.
The company's 8.875 percent senior subordinated notes
maturing in August 2008, which are considered ``distressed,''
were quoted Friday unchanged at 42 cents on the dollar.
Loews is also a partner in Magic Johnson Theaters, Star
Theaters, Yelmo Cineplex de Espana, De Laurentiis d'Italia and
Thanks Very Much!