Loews Cineplex launches $415 million 10-year deal

By Paul Deckelman

New York, July 12 - Loews Cineplex Theaters began a roadshow Monday for a proposed $415 million offering of 10-year senior subordinated notes.

The roadshow is expected to run through the beginning of next week, with pricing expected around July 22-23.

The planned offering will be brought to market via bookrunning managers Credit Suisse First Boston and Citigroup. Co-managers on the deal are Banc of America Securities, Deutsche Bank Securities and Lehman Brothers.

The new notes will be non-callable for the first five years after issue.

The bond deal is being done in conjunction with other financing, notably a $720 million of secured bank facilities, with the proceeds to be used to partly fund the planned buyout of the New York-based motion picture theater operator by a consortium consisting of Bain Capital Partners, The Carlyle Group and Spectrum Equity Investors. They are purchasing the company for C$2 billion from Oaktree Capital Management LLC and Canadian-based Onex Corp.

Standard & Poor's has assigned a CCC+ rating to the bond issue and a B rating to Loews Cineplex's corporate credit and the proposed bank debt financing. The outlook is positive.

S&P said the ratings reflect the company's exposure to the "mature and competitive U.S. movie exhibition industry, high fixed costs, unpredictable film product quality, strong competition from both existing competitors and alternative entertainment sources, and its aggressive financial profile."

The ratings agency cautioned that those potential negatives "are only partly mitigated by the group's position as the third largest U.S. film exhibitor (based on box office revenues), improved market conditions in the United States in the past three years, benefits to Loews' asset quality from rejecting leases in bankruptcy and splitting off its Canadian circuit."

S& P further said that Loews benefits from a strong market position in the high margin Mexican market, "and some limited earnings diversity provided by its Spanish and South Korean joint-venture film exhibition operations."

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