Loews Cineplex Entertainment Corp., offering a glimmer of hope for the beleaguered movie theater industry, said Thursday that it has negotiated a 90-day reprieve on the terms of a $1 billion syndicated loan administered by Deutsche Bank.
In the last two months other movie exhibitors, including, Carmike Cinemas Inc., and United Artists Theatre Circuit Inc., have filed for bankruptcy protection after recently being refused waivers or amendments or offered loan terms that they claimed were unreasonable.
The waiver of loan covenants will allow Loews to have access to funds to meet its financial obligations through Nov. 30. Bank of New York, Bank of America Corp., Credit Suisse First Boston, and Bank of Nova Scotia are among other lenders.
As of May 31, Loews had drawn $562 million on the loan, according to a Securities and Exchange Commission filing. Mindy Tucker, a spokeswoman for the company, said it has drawn more since then, but she would not specify how much.
Deutsche Bank declined to comment.
Last month Loews warned that it would fail the terms of its loan on Aug. 31. In a press statement, Lawrence J. Ruisi, chief executive officer, said Loews was looking for alternatives to improve its capitalization, including possible sales or leasebacks of theaters or equity infusions.
Analysts said the lenders may be anticipating an equity infusion, perhaps from Loews' two largest shareholders, Sony Pictures Entertainment, which owns 23.1 million shares, or 39.5%; and Universal Studios, which owns 14.9 million shares, or 25.5%.
Ms. Tucker said the syndicate is "supportive" of the company. "I'm sure there's a perception that there's deep-pocketed parents standing behind us," she said, but she added that neither Sony nor Universal has lent the company any money or "provided any guarantees."
Some analysts said Loews may also be counting on a new equity sponsor. MDP Ventures, a New York-based developer and landlord for two Loews theaters, raised its stake in the chain to 10.4% from 7.1% recently, according to a filing Monday with the SEC. "It could be that the equity comes from a new player," said Kevin Kuzio, a bond analyst for KDP Investment Advisors.
Though Mr. Kuzio said that the reprieve was expected - the banks have about 1.4 times overcollateralization - and that the lenders are not likely to continue to waive the covenant violations past Feb. 1. That is when a $13 million interest payment on senior subordinated notes is due. Without encouraging news, the bank group could decide to block that payment.
Movie theater chains are being punished for overzealous building in recent years that has put pressure on profits. Screen growth has steadily outpaced attendance growth since 1995, and modern megaplexes have drawn moviegoers away from older theaters.
Standard & Poor's estimates there are 10,000 too many screens, and that operators, in many cases locked into leases, need at least one to three years to right the balance.