Loews Cineplex Entertainment to be Acquired by Investor Group; Proposed Joint Investment By Onex Corporation, Oaktree Capital and Pacific Capital Group

Business Wire, Feb 15, 2001

Business Editors

Note: All figures in U.S. dollars except where noted.

NEW YORK & TORONTO--(BUSINESS WIRE)--Feb. 15, 2001

Loews Cineplex and U.S. Subsidiaries Voluntarily

File Chapter 11 Petitions

Cineplex Odeon and Canadian Subsidiaries File CCAA Application

Group to Provide Equity Investment of Approximately $250 Million

Loews Cineplex Entertainment Corporation (NYSE: LCP; TSE: LCX) announced today that it has signed a letter of intent with an investor group comprised of Onex Corporation (TSE: OCX), Oaktree Capital Management, LLC and Pacific Capital Group, Inc., regarding a proposed acquisition of Loews Cineplex and its subsidiaries and joint venture interests and a restructuring of Loews Cineplex's outstanding indebtedness.

In addition, Loews Cineplex announced that, in conjunction with and as contemplated by this proposed transaction, Loews Cineplex and all of its wholly-owned U.S. subsidiaries have filed voluntary petitions for relief under chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. In Canada, an application under the Companies' Creditors Arrangement Act (CCAA) will be brought today before the Ontario Superior Court of Justice for Cineplex Odeon Corporation and certain of its other Canadian subsidiaries.

Loews Cineplex and all of its subsidiaries will conduct normal business operations. While a number of theatres will close as a result of today's actions, all other theatres operated by the Company will open as usual, offering a full array of films, refreshments and services.

Lawrence J. Ruisi, President and Chief Executive Officer of Loews Cineplex, said:

"We believe the actions we are taking today will allow the Company to move forward as a strong, well-capitalized entity with excellent sponsors at a time when many of our competitors in the North American film exhibition industry are experiencing severe financial constraints. The proposed transaction and related restructuring steps provide an opportunity to resolve our liquidity problems and other issues arising from the industry-wide oversupply of theatre screens," Ruisi concluded.

On behalf of the three investors, Gerald W. Schwartz, President and Chief Executive Officer of Onex, said: "Loews Cineplex has very attractive assets in terms of the high quality of its theatres and their important major market locations. We are excited about the opportunity to own these assets and to work with management to position this company as the preeminent exhibitor in the industry."

The letter of intent contemplates that the proposed acquisition by the investor group would be consummated pursuant to a chapter 11 plan of reorganization and a Canadian plan of arrangement. Under this proposed acquisition and restructuring, the investor group would convert the bank debt it currently holds (approximately $250 million principal amount out of a total of $740 million) into 88% of the outstanding equity of reorganized Loews Cineplex, and general unsecured creditors of Loews Cineplex (including holders of Loews Cineplex's subordinated debt) would receive approximately 12% of the outstanding equity of reorganized Loews Cineplex and warrants to purchase at a premium an additional 5% of such equity. In addition, the proposal provides for a distribution to the holders of the bank debt (other than the investor group) new term loans with an aggregate face amount providing for a blended recovery of 98.26% of the face amount of that bank debt. The proposal does not contemplate any distribution to the Company's existing equity holders. In connection with the proposal, holders of at least two-thirds of the bank debt have agreed to support the Company's approach and negotiate exclusively with the investor group on the transaction contemplated by the letter of intent for a period of 30 days. Cineplex Odeon expects to file its own Canadian restructuring plan, which will provide distribution to its creditors as part of its reorganization.

Onex and Oaktree Capital together beneficially own interests in approximately $250 million of the Company's senior bank debt. Oaktree Capital also owns approximately 60% of the Company's outstanding senior subordinated notes. As participants in the investor group, both are fully supporting this proposal to acquire Loews Cineplex.

In order to finance its operations during the restructuring process and the completion of certain ongoing construction projects, Loews Cineplex has filed a motion with the court seeking interim approval for debtor-in-possession financing from a bank group led by Bankers Trust Company. If the motion is approved, the Company will apply a portion of the financing to enable Cineplex Odeon to meet its capital needs. This proposed new revolving credit facility, which expires on January 31, 2002, is designed to ensure that the Company has sufficient liquidity to operate in the ordinary course and meet certain of its funding commitments for completion of certain theatre complexes now under construction in North America. The proposed aggregate debtor-in-possession financing commitment from the bank group is $60 million.