National Amusements to sell shares of Viacom, CBS

NEW YORK -- Media mogul Sumner Redstone's holding company, National Amusements Inc., is selling some of its stake in CBS Corp. and Viacom Inc. as well as 35 movie theaters to pay off its debts.

The moves will raise around $1 billion in cash and allow National Amusements to meet a $500 million debt payment this month, alleviating concerns that the company could lose control of the media conglomerates or run into trouble with its creditors.

With the asset sales, National Amusements will retain more than 75 percent voting control of both CBS and Viacom while helping pay off some $1.46 billion in debt.

The company ran into problems with its debt late last year as stocks tumbled and the credit markets seized.

It said it did not intend to reduce its stakes further.

"As a result of our actions, National Amusements will be out of debt with its existing creditors and will still control its most important assets," Redstone said in a statement Wednesday.

CBS shares rose 30 cents, or 2.5 percent, to $12.45 in Wednesday afternoon trading while Viacom shares climbed 21 cents to $30.30 as analysts viewed the debt payback positively. CBS and Viacom shares have climbed about 50 percent since the start of the year, amid signs that advertising was recovering with the economy.

CBS reaffirmed its operating profit guidance for the year, expecting between $1.73 billion and $1.93 billion. Viacom stopped providing a specific forecast last year.

"We do not view this sale as a negative read for either stock or our advertising recovery thesis," said Morgan Stanley analyst Benjamin Swinburne.

He said the resolution of National Amusements' debt problems should remove fears of further stock sales.

Besides the share sales, National Amusements will sell 35 theaters it considers noncore assets in the Midwest and "south of New York," according to a person familiar with the company's plans. The person would not elaborate on the locations.

Combined with a tax refund from selling its controlling stake in video game maker Midway Games Inc. last year at a loss, Redstone's company will have just "a small amount" of debt left to refinance, said the person, who was not authorized to speak publicly and spoke on condition of anonymity.

Dedham, Massachusetts-based National Amusements expects to raise $600 million selling shares of Viacom, which includes the Paramount movie studio as well as cable networks MTV and Comedy Central, and $345 million from shares of CBS, which runs the CBS broadcast network and pay-TV channel Showtime Networks.

It is selling all of its nonvoting shares in both companies and converting some of its voting shares into nonvoting shares, which it will then sell as well. Both transactions are being underwritten by Citigroup Inc. and JPMorgan Chase & Co. Pricing is expected to be set after the market close on Wednesday.

Since last December, National Amusements had been looking for buyers of some 45 multiplex theaters, with 593 movie screens, to help reduce its debt load, a person with detailed knowledge of the offer told The Associated Press at the time.

Redstone and his daughter, Shari, who is National Amusements' president and owns a minority stake in the company, had been personally calling potential buyers in hopes of raising $230 million to $280 million from the U.S. movie screens, according to the person, who spoke on condition of anonymity because the discussions were supposed to be confidential.

National Amusements planned to keep 28 theaters, with 368 screens, located in Massachusetts and New York. Its theaters operate under other brand names, including Showcase, The Bridge and Multiplex Cinemas.

The sale detailed Wednesday suggested it had followed through with its plans. It was unclear how much money the company raised through its sale of the theaters.

National Amusements also owns movie theaters in the U.S., U.K., Latin America and Russia.

The falling value of CBS and Viacom shares pushed the company into violation of its debt terms last year. Its lenders, led by Bank of America, forced the company to sell off $233 million in Viacom and CBS nonvoting shares last October. At the time, Redstone vowed not to sell any more of its stake in the companies to pay off the debt.

Weeks later, with $800 million in payments coming due Dec. 19, he sold his family's controlling stake in Midway Games for less than a penny per share, helping National Amusements offset its taxable gains.

It restructured $1.46 billion of borrowings in May, pushing the debt's maturity to Dec. 31, 2010, with certain payments due this year and next.