Anschutz Takes Regal Into Bankruptcy

DENVER-Regal Cinemas Inc., the nation’s largest movie theater owner, will seek protection from creditors in a prepackaged Chapter 11 bankruptcy filing, a move that confirms Denver billionaire Philip Anschutz’ position as the No. 1 owner of movie houses in the nation. Following the bankruptcy, Anschutz and partner Los Angeles-based Oaktree Capital Management will convert about $1 billion of Regal bonds into equity.

Anschutz purchased the bonds for pennies on the dollar.

Anschutz already has done similar deals with United Artists Theatre Corp. in Denver and the smaller Edwards Theatre Circuit Inc. of California. United Artists is the nation’s sixth-largest owner of theaters.

When Regal, based in Knoxville, TN, emerges from bankruptcy in about three months, Anschutz will control about 20% of the nation’s 30,000 screens, far more than anyone else. That is expected to give him more clout when negotiating with Hollywood studios for the rights to exhibit films.

The bankruptcies allow the theater chains to get out of expensive leases in older buildings. Nationwide, overbuilding expensive, multi-plex theaters with stadium seating and cutting edge sound systems has hurt earnings at movie theater chains. At the same time, movie lovers increasingly are opting to watch flicks at the new improved theaters, ignoring the older ones. Because of the high ceilings and slanted theaters in theaters, they are very hard to retrofit for other retail uses.

Because of more popular films this year, Regal posted revenues of $579.3 million in the first six months of this year, compared with $506.8 million during the same period in 2000.

After the Regal bankruptcy, Regal’s owners, the investment firm of Kohlberg Kravis Roberts & Co. and Hicks, Muse, Tate & Furst Inc., will be out of the picture, but will not be responsible for any debt. Unsecured creditors will receive up to 100% of their claims from a $75 million pool created as part of the reorganization.

In addition to the movie chains, Anschutz is the largest shareholder of Denver-based Qwest Communications International Inc. He also is a co-owner of the Staples Center in Los Angeles, and is an owner of the Los Angles Kings, Colorado Rapids, as well as other soccer teams around the world. He also owns Concert West, a concert promoters firm and is negotiating to buy the House of Blues.