National Amusements looks to restructure debt

Company may be in a worst position than first thought

Sumner Redstone is trying to rid himself of debt headaches, which many believe are worse than first thought.

National Amusements, the holding company that houses Redstone's controlling stakes in Viacom and CBS, is looking for ways to restructure or refinance what is widely believed to be $1.6 billion in unsecured debt before half of that amount comes due in December. It remains unclear whether NA might have to sell more CBS and Viacom shares in the process.

National Amusements said Friday that it is in "constructive" discussions with its banks and other debtholders "regarding a covenant issue" on its unsecured debt. The company did not provide further details.

The news came days after NA had to sell $233 million in nonvoting shares of the two entertainment companies. The sale was necessary for NA to remain in compliance with its credit covenants after Viacom's and CBS' recent price drops. NA said the talks are overseen by a board committee comprising George Abrams, David Andelman and Redstone's daughter Shari, who runs NA's movie-theater circuit.

Also Friday, Viacom disclosed in a regulatory filing that it and NA have ended an arrangement that saw NA sell Viacom shares to the company when Viacom bought back its stock to keep its ownership stake in Viacom unchanged.

NA has not disclosed its debt obligations and covenant conditions, leaving Wall Street observers guessing. One issue that seems to have reactivated conflicts within the Redstone family is who to blame for the crunch, with Shari Redstone telling the Wall Street Journal a few days ago that it has nothing to do with the performance of her theater circuit.

In a blog post Friday, Pali Capital analyst Richard Greenfield argued that both father and daughter likely contributed to the problem. He suggested NA's financial crunch is a confluence of several factors, including the theater circuit building screens, Sumner Redstone using NA money to buy shares of video-game firm Midway Games and buy out his son Brent, and the Viacom and CBS share declines.
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