Problem-Loan Spotlight Turns to Movie Theaters

By Mandaro, Laura | American Banker, July 26, 2000 | Go to article overview

Problem-Loan Spotlight Turns to Movie Theaters


Mandaro, Laura, American Banker


As second-quarter earnings were released this month, bank executives offered reassurances that their diversified loan portfolios were unlikely to be subject to the kind of single-sector blowup that the stricken health-care industry produced last year.

But several of the biggest U.S. banking companies are sitting on credits to an industry that is showing signs of massive strain, according to analysts. Movie theater operators, including well-known names like New York-based Loews Cineplex Entertainment Corp. and AMC Entertainment Inc., are under severe pressure after years of rapid expansion -- using leveraged bond and bank debt -- that failed to generate the expected returns.

Rosalind F. Looby, a regional banking analyst at Donaldson, Lufkin & Jenrette Inc., estimates that banks have about $5.1 billion in current loan commitments to the movie theater industry outstanding. While less than banks' exposure to health-care companies when they started to falter in 1998 after Congress passed changes to Medicare reimbursement laws, it's close enough for discomfort. Banks made a total of $7.8 billion in loans to health-care companies that year, according Portfolio Management Data, a unit of Standard & Poor's.

"If a lot of companies are involved in serious writeoffs, this could cause banks some headaches," said Ms. Looby.

Signs of weakness in the movie theater sector are hardly new. Analysts say they have been concerned with the industry for the last 18 months, as a wave of building across the country produced more movie screens than consumers can support. Patchy movie seasons, such as the recent Christmas openings, also hit attendance rates.

"You're pretty close to the bottom in leverage right now," said Bishop Cheen, an analyst at First Union Securities.

Which banks hold these loans? According to the movie theaters' initial filings with the Securities and Exchange Commission, the debt is spread amongst the biggest commercial lenders, including Bank of America Corp., Bankers Trust Co. (now owned by Deutsche Bank AG), Wachovia Bank, FleetBoston Financial Corp., and Canada's Bank of Nova Scotia.

Already one movie theater operator, United Artists Theatre Circuit Inc. of Englewood, Colo., has defaulted on its commitment - a $450 million facility led by Bank of America Corp.

Overexpansion has also hurt regional players, perhaps even more so because they don't have as much access to capital, said analysts. Dallas-based Silver Cinemas International Inc. filed for bankruptcy protection in May. Union Bank of California, a Bank of Tokyo-Mitsubishi affiliate that recently reported higher nonperforming assets, is among the banks that have lent to these companies.

Union Bank, with Bank of America as co-manager, led a $250 million credit facility to privately held Edwards Theatres Circuit Inc. of Newport Beach, Calif.

But the most revealing indication of the pressure on these companies is how their loans are trading in the secondary market. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Problem-Loan Spotlight Turns to Movie Theaters
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.