Redstone Dodges Deadline
December 19, 2008 at 5:13 AM (PT)
SUMNER REDSTONE's NATIONAL AMUSEMENTS and its creditors have agreed to extend indefinitely TODAY's deadline to repay $800 million in debt so the two sides can continue to try to work out a refinancing agreement, writes PETER LAURIA in THE NEW YORK POST.
In theory, the 15 institutions in the debt syndicate could demand repayment or force the company into bankruptcy. But people familiar with the situation said both sides agreed weeks ago to ignore the deadline because bankruptcy would be harmful to all parties involved.
NATIONAL AMUSEMENTS, REDSTONE's private holding company which includes CBS, has enough cash to continue making interest payments, which in turn gives the banks desperately needed liquidity. Conversely, since the bank debt is unsecured, forcing the company into bankruptcy runs the risk of losing that cash flow.
What's more, in a bankuptcy, NATIONAL AMUSEMENTS has exclusive rights to devise a reorganization plan for 18 months -- shutting the banks out of the process. But Redstone's corporate cornerstone isn't off the hook entirely. Sources said the terms of any refinancing agreement would certainly be more onerous to the company than the original loan.
"The banks want a smaller loan with higher interest rates that is securitized by assets," said one person.
Sources said an agreement likely won't be reached for another month or two.