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For movie theater operators, the drama has shifted from the big screen to the balance sheet. In a year-long shakeout for the industry, four struggling theater chains have filed for protection from their creditors in U.S. Bankruptcy Court in Wilmington, Del. The latest is United Artists Theatre Co. of Englewood, Colo., which in court papers listed $752.31 million in debts and $16.83 million in assets. United Artists Chief Executive Kurt C. Hall blamed the industry’s troubles on “predatory” practices by theater operators in the past three years. This has included an unprecedented investment of $3.5 billion by the big five exhibitors. Most of that investment went toward new stadium-seating megaplex construction, Hall said. While the number of screens grew by 26 percent since 1996, ticket revenues failed to keep pace. United Artists was forced to close 343 unprofitable screens this year, leaving the company with 225 theaters and 1,675 screens at the end of August. “The result has been lower industry attendance per screen and seat — and tightening liquidity for our company and virtually all other major theater operators,” said Hall. Particularly vulnerable have been operators of older theaters in secondary markets, said Laura Davis Jones of Pachulski Stang Ziehl Young & Jones of Wilmington, Del., which is handling the United Artists bankruptcy. “United Artists is probably one of the better situated theater companies,” said Jones. Other theater chains have sought to reorganize in Delaware’s bankruptcy court in the past year, including Carmike Cinemas of Columbus, Ga. It is the country’s largest motion picture exhibitor in terms of the number of theaters (436) and the third largest if judged by its 2,802 screens. It had launched a $22 million expansion. Carmike filed its Chapter 11 petition on Aug. 8. Three months earlier, Silver Cinemas International Inc., an art-film theater chain based in Dallas, filed for reorganization, while WestStar Cinemas of Encino, Calif., sought protection in Delaware last year. “I believe this is not the end of the industry’s restructuring,” said Jones. “My expectation is there will be several more filings.” United Artists filed a pre-negotiated bankruptcy that calls for The Anschutz Corp. of Denver, the company’s largest holder of bank debt, to become the company’s new controlling shareholder with approximately 55 percent of the company’s new shares. Anschutz, a company with investments in telecommunications, oil, real estate and sports franchises, also arranged to provide United Artists with a $25 million debtor-in-possession loan. At the first day hearing, the court granted United Artists permission to use up to $15 million of the loan. The Anschutz corporation, owned by Philip Anschutz, has significant interests in the Los Angeles Lakers and Kings and Qwest Communications, to name a few. The plan provides for $715 million of its debt to be converted into $252 million of new secured debt and various classes of stock representing nearly all the ownership in the company. It also calls for the termination of 70 leases on closed theaters and 59 leases on theaters that were assigned or subleased to other operators. If the reorganization is confirmed as planned, the company’s overall indebtedness will be reduced to $260 million and annual interest payments lowered from more than $75 million to roughly $27 million. A hearing on confirmation of the plan is scheduled for January 2001. “With this stronger balance sheet, the company will be well-positioned for the industry recovery as seat and screen capacity comes into balance with industry customer demand,” said Hall. The case is In Re United Artists Theatre Co., No. 00-3514.

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