Icahn weighs in on Lions Gate's neutral stance toward convertibles tender offer

By Angela McDaniels

Tacoma, Wash., March 30 - Carl Icahn responded Monday to Lions Gate Entertainment Inc.'s neutral position in regards to his tender offer for the company's $150 million 2.9375% convertible senior subordinated notes due 2024 and $175 million 3.625% convertible senior subordinated notes due 2025.

As previously reported, the board noted that the convertibles have upcoming put options at prices greater than those being offered by Icahn.

"However, the company fails to communicate whether its current liquidity position would be sufficient to meet such obligations," Icahn said in a news release.

The company had $131 million in unrestricted cash of as of Dec. 31 and recently closed its $255 million all-cash acquisition of the TV Guide Network, he said.

For each $1,000 principal amount, Icahn's group is offering $750 for the 2.9375% convertibles and $730 for the 3.625% convertibles plus accrued interest to the purchase date.

The 2.9375% convertibles are putable at par plus accrued interest on Oct. 15, 2011, and the 3.625% convertibles are putable at par plus accrued interest on March 15, 2012.

The Lions Gate board also said that a change in control triggered by ownership of more than 20% of the company's equity could result in an event of default under its credit facility, resulting in a cross-default and acceleration of Lions Gate's obligations under the notes. In turn, this could trigger accelerated repayment obligations under both the credit facility and the notes.

Icahn said that if the payments under the notes and revolver were accelerated, the company would face either a refinancing or restructuring.

"Because any consideration of refinancing must take into account the difficult state of the current credit markets, one is left to speculate how the company would meet this demand without restructuring?" he said.

If the company is forced to restructure, Icahn and his affiliates believe that much of the company's equity would end up being owned by the debtholders.

"In the long run, due primarily to the company's library assets, these assets would provide the noteholders full 'recovery value' if managed properly. The other noteholders, when considering my tender, should ask themselves whether or not they believe the same," he said.

As previously reported, Icahn had been in discussions with the company about adding some designees to the board of directors. In a prior statement, Icahn said these discussions were terminated because agreement could not be reached about some aspects of the standstill agreement that Lions Gate required as a condition to installing those board members.

The investor and his affiliates own 14.5% of the company's common stock.

D.F. King & Co., Inc. (Edward McCarthy or Kristian Klein at 212 269-5550) is the information agent for the tender offer.

Lions Gate Entertainment Inc. is a Santa Monica, Calif.-based subsidiary of Lions Gate Entertainment Corp., which is a filmed entertainment studio with headquarters in Vancouver, B.C.

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