The media mogul told the Wall Street Journal there’s “not a chance” he will sell either CBS Corporation or Viacom to clean up the balance sheet at National Amusements Inc. (NAI), the private company that controls both public companies. Sumner Redstone hates to sell stock in his own companies and has never sold any of the voting stock by which NAI controls both CBS and Viacom. He was clearly chagrined at even having to sell $233 million of non-voting stock to shore up NAI’s financial position.
“We have no intention to sell any more stock and I’m decisive about that,” he told the WSJ. Redstone noted that the recent sales were just a small portion of NAI’s holdings in the two public companies. “I still own billions of dollars of stock,” he said, equating himself with NAI.
About half of NAI’s $1.6 billion in debt is believed to be coming due in December. Normally, the company would be shopping for the best deal from current and potential lenders. But the current credit crunch has made it difficult for anyone to borrow hundreds of millions. NAI is particularly squeezed because so much of its value is in CBS and Viacom stock, both voting and non-voting, and those stock prices have fallen dramatically this year.
The falling stock prices apparently pushed NAI out of compliance with loan covenants, a situation apparently remedied by the $233 million in stock sales. But now the company has to deal with refinancing about $800 million of debt in a tough credit market.
RBR/TVBR observation: Rest assured, Sumner Redstone is not without options. Not a lot is known about the balance sheet at NAI, since it is a private company owned 80% by Sumner and 20% by his daughter, Shari, but one important fact was disclosed recently. In stating that it was in talks with its lenders, NAI noted that its debt at issue is unsecured. So, the lenders can’t lay claim to the company’s CBS stock, Viacom stock, or any other particular asset in an event of default. Rather, if they were to force NAI into receivership or bankruptcy reorganization, they would be standing in line behind the company’s secured creditors. That gives Shari Redstone and two other NAI directors some leverage in their talks on restructuring that $1.6 billion in debt, or at least the half coming due before the end of this year.