National Amusements To Restructure Credit

National Amusements Inc., the movie-theater chain that in recent decades has become predominantly a holding company for its controlling stake of ViacomCBS, has reached a deal with Wells Fargo & Co. to restructure its credit facilities, the company said Thursday.

The Wall Street Journal reports the restructuring became necessary after the value of the ViacomCBS shares pledged as collateral for credit fell below Wells Fargo’s minimum threshold, according to people familiar with the matter.

ViacomCBS’s stock has been under pressure long before fears about the spread of the coronavirus started roiling global markets. Shares started dropping pretty much since the merger of sister companies CBS and Viacom was finalized last year, and are down nearly 65% so far this year.

As part of the deal with Wells Fargo, National Amusements is giving up the $75 million revolving credit line that was available to its movie-theater unit, people familiar with the matter said.

“Following this amendment, [National Amusements] will have a revolving facility of $125 million,” the company said, which it can use to fund operations of its theater business. The company’s $125 million credit line was existing prior to the deal and had been renewed, the people said.

A person familiar with the matter said the movie-theater unit, NAI Entertainment Holdings, had only drawn upon $25 million of its $75 million available credit, while the parent company had drawn upon none of its $125 million in available credit.

The company revised its free cash flow and profitability targets downward since the 2019 merger of CBS and Viacom, disappointing many investors. Viewers continue to abandon pay-TV in droves, imperiling one of the company’s core revenue streams.

Last year’s merger of Viacom and sister company CBS was billed as a valuable combination that would create a “content powerhouse” by fusing Viacom’s Paramount film studio and cable networks such as MTV, Nickelodeon and Comedy Central with the CBS broadcast network, giving both companies more leverage in negotiations with pay-TV distributors.

The market wasn’t convinced. When the companies announced the combination in August, the value of the combined company was roughly $30 billion. By December, after its first day of trading, the company’s value had sunk to $15.3 billion. Earlier this week, the company’s value was $8.9 billion.

Elsewhere, the company’s TV ad revenue stands to take a substantial hit from the cancellation of the NCAA Division I Men’s Basketball Tournament, known as “March Madness.” Ad revenue for the tournament, which airs on AT&T Inc.’s TNT channel and the CBS broadcast network, topped $900 million in 2019, according to market research provider Kantar Group.