- The Washington Times - Wednesday, January 24, 2001

Loews Cineplex Entertainment Corp., the biggest publicly traded U.S. movie chain, said yesterday it plans to close or sell 112 theaters as it tries to trim expenses and avoid bankruptcy.

The chain has not decided which theaters to eliminate, but local Loews Cineplex Odeon and Loews cinemas most likely will not be among them, the company's analysts said.

The chain probably will target its theaters in Canada, where New York-based Loews Cineplex Entertainment Corp. operates under the name Cineplex Odeon Canada, in the Midwest, and older facilities that came with Cineplex Odeon when Loews bought it in 1989.

"Certainly Canada, in particular, has performed worse than the U.S.," said Geoff Oltmans, an analyst with Lehman Brothers who covers the company. "I don't know the percentage, but on a proportional basis, I would expect them to close more in Canada than in the U.S. Not necessarily more screens, but certainly proportionally."

Another analyst, who spoke on the condition of anonymity, said Loews Cineplex may retreat from the Midwest, where it faces tougher competition.

A third analyst suggested older facilities may be the victims.

"My guess is that most of the theaters they are going to be closing are the theaters from the Cineplex Odeon chain," said Kevin Kuzio, analyst with KDP Investment Advisors. "Back before they sold, the company faced capital constraints, and it was our opinion at the time that they were falling behind on the refurbishment of their theaters."

The closures amount to 23 percent of Loews Cineplex's 2,790 screens across the nation, Canada, Europe and Asia. The chain closed 65 screens at 15 locations between September and November, none local.

Loews Cineplex runs 25 theaters in the Washington area, including nine of the District of Columbia's 11 theaters.

Mindy Tucker, the chain's vice president of strategic planning, said the list of closing theaters has not been finalized.

"But these are underperforming theaters that are no longer competitive in their market and have just become too expensive for us to operate," she said.

Eight theater chains filed for Chapter 11 bankruptcy protection last year. They are allowed to operate but are protected from their creditors while they restructure.

The industry's problems began in the mid-1990s, when megaplex theaters were introduced. The new facilities are outfitted with stadium-style seating, surround sound and elaborate concession stands, but they cost more to build than traditional theaters.

The companies racked up about $7 billion in debt in their rush to build megaplexes, only to find themselves stranded with the older theaters they couldn't close because most of them were bound by long-term leases.

Chains including United Artists Theatre Co., GC Co.'s General Cinemas, Carmike Cinemas Inc., WestStar Cinemas Inc., Silver Cinemas International Inc. and Edwards Theaters Circuit Inc. are trying to solve their problems while under bankruptcy protection.

On Monday, a federal bankruptcy judge approved United Artists' reorganization plan, giving Colorado billionaire Philip Anschutz control of the company.

Two weeks ago, the privately held Anschutz Corp. of Denver and Los Angeles-based Oaktree Capital Management bought $350 million of the $1 billion debt of the nation's largest movie theater chain, Regal Cinemas.

Industry analysts say that if Anschutz gains control of Regal, it would make sense to merge it with United Artists, creating a blockbuster movie company. While Anschutz is the largest owner of Regal, its bankers have not agreed to allow Anschutz to take control.

This leaves Loews Cineplex and AMC Entertainment as the only major chains still running under normal operations.

"But [bankruptcy] certainly is one of the alternatives," Miss Tucker said. "Something we have to consider under our financial situation."

Loews Cineplex recently announced staggering losses for its third fiscal quarter ended Nov. 30. Sales fell 8 percent to $192.14 million from $209.25 million a year earlier. Net losses grew 680 percent to $185.90 million ($3.17 per diluted share) from $23.84 million (41 cents).

Diluted shares reflect the value of options, warrants and other securities convertible into common stock.

But the New York chain's woes threaten to worsen this week, as it faces a Friday deadline to meet conditions on a $1 billion loan. The lenders, including Bank of America and Deutsche Bank Alex. Brown, have been granting Loews Cineplex waivers since the spring, so that the company could get back on its feet.

It is not clear if the lenders will give the company yet another waiver, but even if they did, Miss Tucker said, Loews still could seek bankruptcy protection.

Shares of Loews Cineplex closed at 47 cents on the New York Stock Exchange, down from 56 cents Monday.


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