Redstones' Holding Company Amends Credit Pact Without Pledging More ViacomCBS Stock

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Shari Redstone

National Amusements, through which the family controls ViacomCBS, and its lenders renegotiated a credit line of a subsidiary after a recent technical violation.

National Amusements, the holding company through which the Redstone family controls ViacomCBS, has amended a credit agreement with its lenders after a recent technical violation of a minimum collateral requirement on a credit line owing to the sharp decline in ViacomCBS' stock price amid the new coronavirus pandemic.

National Amusements, whose president is Shari Redstone, got a chance to cure the situation by March 28 and has now agreed with its lenders to terms that cure the technical violation. 

"Following this amendment, NAI will have a revolving facility of $125 million and ample liquidity, in addition to its substantial cash reserves, to fund operations of [its operating subsidiary], which includes its theater business," the company said. "NAI will not sell stock in ViacomCBS  and does not intend to pledge additional stock of ViacomCBS, which remains at existing levels."

LightShed Partners analyst Richard Greenfield said that the amendment includes the extinguishment of a $75 million credit facility of a subsidiary, of which the company had $25 million drawn. "That credit facility was paid off utilizing cash on hand, implying that NAI clearly had more cash then we were aware of," he wrote. 

Greenfield also highlighted that NAI owns much of the real estate it has cinemas in. "NAI clearly feels comfortable that even with no revenue coming in from their 950 screens in the U.S., U.K. and Latin America, the $100 million in cash and $125 million in undrawn revolver is more than enough to carry them through the ongoing pandemic," he wrote. "Worth remembering, that NAI owns a significant portion of the real estate underlying their theater chain, whereas most other U.S. theater chains do not and are making lease payments without any revenues coming in."

S&P Global Ratings earlier this month put National Amusements on credit watch, meaning it was considering a debt ratings downgrade, citing the technical violation and business trends. "We expect the spread of the new coronavirus to negatively affect theater attendance in 2020 as movie releases are delayed and consumers increasingly avoid public areas," it said in a report back then.

"While the decline in the value of the collateral package is substantial, we believe the company has sufficient assets to cure its covenant violations by adding more shares to the collateral package, using cash on hand to reduce its outstanding debt, or by amending the credit agreement to provide additional headroom," S&P added.