Icahn threatens Lionsgate bankruptcy

Shareholder fires new warning at board of directors

TORONTO -- Looking for leverage in his escalating fight against Lionsgate, activist shareholder Carl Icahn on Friday warned he's prepared to tip the mini-studio into bankruptcy.

"I am truly mystified by some of your actions -- and your inaction -- in the face of the abject failure of the current management team to deliver value to shareholders, and I fear for the future of our company," he told the Lionsgate board of directors in an open letter.

Icahn reminded the board that he needs only 20% of Lionsgate shares to trigger a default under the company's credit facilities, forcing the mini-studio to secure a waiver from its bankers or refinance its debt.

"... Our purchase of even the 3.7% of outstanding shares that were tendered into the offer and not withdrawn as of our last announcement would already be enough to trigger this domino effect which, unless your lenders were to waive these defaults, could lead to the ultimate implosion of the company," he wrote.

Absent the necessary waivers or new financing, Lionsgate faces either tipping itself into voluntary bankruptcy filing, or its lenders or bondholders choosing to file an involuntary petition for bankruptcy, Icahn added.

The billionaire investor repeated an offer to provide Lionsgate with a bridge facility, to be repaid via new debt and a rights offering. "As we have stated before, we would be willing to backstop any such rights offering," Icahn said, a move that would make him Lionsgate's largest investor, a major creditor, not to mention an even larger thorn in the side of the mini-studio's senior management.

Lionsgate, for its part, said it is taking steps to stay ahead of Icahn and its credit line default threat.

The studio in a statement said it has been holding talks with lenders to secure a waiver or amend its credit facilities to prevent a default, "and is confident in its ability to obtain one in the near future if necessary."

"In addition, the company and its management have looked at financing options and alternatives to ensure that shareholder value is protected and that the company will be able to continue its business despite the consequences of the Icahn Group's offer," Lionsgate said.

The studio added that it was keen to see Icahn's proposed bridge facility, and called on the activist shareholder to reveal its terms. "To date, Mr. Icahn has not shared any of those terms," Lionsgate urged.

Icahn lashing out at the Lionsgate board comes as his current $7-per-share tender offer gets set to expire Wednesday.
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