Cannon Group Gets Breathing Room on Debt : Financier Grants 5 More Days to Raise $80 Million

Hard-pressed Cannon Group staved off a debt crisis Monday with an agreement giving it at least five more days to come up with an $80-million cash installment payment on its $270-million purchase last spring of a British theater chain and film studio.

Securities watch services, which recently downgraded Cannon debt securities, have said that failure to resolve the now-postponed deadline could force the Los Angeles-based independent movie maker into a default on its huge publicly held debt--and possibly insolvency and bankruptcy proceedings.

However, some Wall Street observers have indicated that they believe it likely that Cannon and New York investment banker Drexel Burnham Lambert will be able to raise the necessary cash due Australian financier Alan Bond, who sold the British properties to Cannon last May 1.

Sweetener Added

This opinion was reinforced Monday by the joint statement by Bond and Cannon of an agreement in principle on the debt that initially” extended the deadline on the $80 million to this Friday. As a sweetener, Bond will grant Cannon certain video and theatrical distribution rights in Australia “if the initial payment is made Dec. 19.”

On its part, Cannon is granting Bond 500,000 warrants to buy Cannon stock at $16 a share. The market price lost two-thirds of its value between early November and early December, dropping as low as $9.50. It closed Monday at $12.50, up 87.5 cents for the day on the New York Stock Exchange.

In negotiating the revised terms of its Bond debt, Cannon’s situation was eased to the extent that a $30.6-million balance above the $80 million is to be converted into four-year senior subordinated notes. Under the earlier agreement, Cannon’s failure to pay the $80 million by Dec. 15 also would have accelerated the $30.6-million balance to be due the same date. That balance originally was due next May.