Friday October 12, 1:53 pm Eastern Time Regal Cinemas Files for Ch. 11 Bankruptcy By Jonathan Stempel

NEW YORK (Reuters) - Regal Cinemas Inc. said on Friday it became the latest U.S. movie theater operator to file for court protection from its creditors, a move that paves the way for Denver billionaire Philip Anschutz to assume formal control.

Regal, founded in 1989 and based in Knoxville, Tennessee, is the largest U.S. operator with 3,831 screens in 328 theaters.

It follows Loews Cineplex Entertainment Corp., Carmike Cinemas Inc. and several other large theater operators that have sought bankruptcy protection over the last 18 months, after the chains overexpanded and took on billions of dollars of debt.

The company and 15 subsidiaries filed late Thursday for Chapter 11 protection with the U.S. Bankruptcy Court for the Middle District of Tennessee, and said it asked for a Dec. 7 hearing to confirm its plan. It listed $1.92 billion of assets and $2.29 billion of debts.

With Regal, Anschutz will oversee more than 6,000 U.S. movie screens, nearly one-fifth of the national total, in three companies, giving him bargaining power with studios.

``While many companies are recapitalizing, ultimately, the industry still needs fewer screens,'' said Christopher Harris, a high-yield theater and media analyst for Banc of America Securities LLC.

Regal, which has eliminated 497 screens in 63 theaters since the end of 2000, had said on Sept. 6 that it would seek creditor approval to restructure its $2 billion of debt in a filing under Chapter 11 of the U.S. Bankruptcy Code.

The filing marks a defeat for private equity firms Kohlberg Kravis Roberts & Co. and Hicks Muse Tate & Furst, which bought Regal in 1998 for $1.57 billion. The reorganization plan was expected to leave them with none of their initial equity investment, which they have written off in the last year.

PREPACKAGED PLAN ACCEPTED

Anschutz has scooped up most of Regal's bank debt and subordinated bonds at a fraction of their face value, giving him effective control of Regal. He has already taken over United Artists Theater Co. and Edwards Theaters Circuit Inc.

``Anschutz should make out extremely well in a restructured cinema industry because of increased bargaining power with the studios,'' said Sean Egan, managing director at Egan-Jones Ratings Co. in Philadelphia. He said a restructured Regal should be worth about $2 billion, and have ``very little'' debt.

Regal said holders of more than 95 percent of its subordinated bonds and other general unsecured creditors, including suppliers, have accepted its ``prepackaged'' reorganization plan.

``Today's action will not only provide the greatest recovery for our creditors, but also presents the most effective means to restructure Regal's indebtedness,'' Regal chief executive Michael Campbell said in a press statement.

Campbell said daily operations at Regal theaters will continue as usual during the reorganization process, which should last 60 to 90 days. Regal employed more than 15,000 people at the end of 2000.

Oaktree Capital Management, a Los Angeles buyer of distressed debt, was also expected to take a significant minority stake in Regal.

CREDITOR REPAYMENT

Regal said under its plan, certain senior bank debt holders will receive 100 percent of the reorganized company's common stock. Holders of Regal's $800 million of subordinated notes will receive pro rata shares of cash totaling $181 million.

General unsecured creditors, who usually receive little in a bankruptcy reorganization, may fare better under Regal's proposed plan. Regal said it will pay in full, with interest, those to which it owes less than $5,000. Larger creditors will receive a total of up to $75 million in cash, which may be enough for payments in full, Regal said.

In its bankruptcy filing, Regal said its largest trade creditor is Canadian big-screen theater company Imax Corp. (Toronto:IMX.TO - news; NasdaqNM:IMAX - news), which has a $1.38 million claim.

-- Guy Daley (guydaley1@netzero.net), October 12, 2001