Firms Await Happy Ending for Loews –

Onex Corp., Oaktree Capital Management and Pacific Capital Group last month agreed to acquire troubled cinema company Loews Cineplex Entertainment Corp. for $1.3 billion.

In that same week, Loews announced that it, and all of its wholly owned U.S. subsidiaries, had filed for Chapter 11 bankruptcy protection.

A proposal from the investor group calls for Loews Cineplex to be acquired in exchange for an equity investment valued at approximately $375 million as well as a comprehensive restructuring of the company’s outstanding debt. The investor group would convert its debt holdings into new equity of the company.

Onex, a Toronto-based publicly traded buyout firm would contribute approximately $170 million in equity to the company and become its controlling shareholder.

Onex and Oaktree Capital, based in Los Angeles, together own interests in approximately $250 million of the company’s senior bank debt out of a total of $740 million. Oaktree Capital also owns approximately 60% of Loews’ outstanding senior subordinated notes.

Under the proposed transaction, the investor group would convert the $250 million of bank debt it currently holds into 88% of the outstanding equity of the reorganized Loews Cineplex. General unsecured creditors of the company would receive approximately 12% of the outstanding equity and warrants to purchase an additional 5% of the equity at a premium.

Loews Cineplex is one of the largest publicly traded theater exhibition companies in the world in terms of revenue and operating cash flow. In a statement, it listed assets of $1.8 billion and liabilities of $1.5 billion. It is in the process of closing certain cinemas in the U.S. and Canada primarily as a result of a severe slump in profitability in the cinema industry created by an oversupply of movie screens.

Calls to the firms involved in the Loews deal went unanswered.