Redstone not out of the woods yet


National Amusements Inc. (NAI), the company through which Sumner Redstone controls both CBS Corporation and Viacom, has struck a deal with lenders to restructure its $1.46 billion in debt. But the previously unsecured debt is now secured by, among other things, NAI’s stock in CBS and Viacom, and the entire amount has to be repaid or refinanced by the end of 2010, so Redstone is still under pressure to sell assets over the next 22 months.

NAI said the deal it struck with its lenders will extend the maturity of its existing $1.46 billion of existing debt to December 31, 2010, although certain repayments will be due in late 2009 and in 2010. “The restructured debt would be secured by substantially all of National Amusements’ assets. National Amusements would be permitted to satisfy the indebtedness with cash flow from its operations and through tax refunds and the sale of assets as determined by National Amusements,” the company said in a statement.

NAI apparently expects to get a big tax refund as a result of selling its stake in Midway Games at a huge loss – a maneuver which, incidentally, forced Midway to seek bankruptcy court protection.

Also, to raise cash to pay the banks, NAI is expected to put lots of its movie theaters up for sale. That could further strain relations between Sumner Redstone and his daughter, Shari, who runs the theater chain. But in the current economy, it remains to be seen how many bidders will be interested in the 1,500-screen theater chain spread across the US and UK.

RBR/TVBR observation: OK, that “pressure” is relative. If you or I had failed to pay a big debt that had been due in December, it’s doubtful that we would have been still negotiating with the bank through February. But when the outstanding balance is the size of the NAI debt, the debtor actually has a stronger bargaining position. So, Redstone was able to keep the banks at bay after some $800 million came due in December and reworked the whole package to give him some breathing room. If an economic recovery hasn’t boosted the outlook for NAI, CBS and Viacom by then, Redstone could force the lenders back to the table for more negotiations. The banks really don’t want to see $1.46 billion in loans go bad.