Anschutz Poised to Own the Most Screens in U.S.

Denver billionaire investor Philip Anschutz, owner of the Los Angeles Kings and Staples Center, is poised to become the largest operator of movie screens in the United States as he continues to mine assets in the beleaguered exhibition business.

Knoxville, Tenn.-based Regal Cinemas, the nation’s largest theater circuit, confirmed Wednesday that Anschutz and Los Angeles investment fund Oaktree Capital Management had acquired a large portion of its bank debt.

Regal Chairman Michael Campbell said in a prepared statement that the debt purchase “will enhance our ability to complete our restructuring and move forward with the management of our business.”

During the last six months, Anschutz has been quietly accumulating Regal’s bank debt. A source familiar with the transaction said Anschutz and Oaktree jointly acquired $345 million, about 35%, of Regal’s $1-billion debt. Anschutz owns 80% of that amount and Oaktree holds the remainder.

The move, which was reported in the Wall Street Journal on Wednesday, comes after a five-year buying spree that has moved the Denver railroad and telecommunications magnate into sports, media and entertainment. These acquisitions also have positioned Anschutz as a major player in Los Angeles sports, live entertainment and downtown real estate.

Regal marks his second foray into the movie theater business. Last fall, Anschutz seized an interest in another financially ailing circuit, Denver-based United Artists Theater Co., after quietly buying up its debt.

Anschutz is well-positioned to take control of United Artists if courts approve the chain’s bankruptcy reorganization plan at the end of this month.

UA is one of eight theater circuits to have filed for bankruptcy protection recently after financially overextending themselves in building new multiplexes during the last several years.

Analysts estimate that there are as many as 30% more screens than the market can bear.

It is largely expected that Regal and Loews Cineplex Entertainment Group are next in line to reorganize under bankruptcy protection.

With Regal owning 4,361 screens and United Artists with 1,700, Anschutz would control around 6,000 screens in more than 600 locations, making him the largest theater owner in the country.

Anschutz, who made his fortune in railroads, oil and gas and telecommunications, is worth $15.5 billion, according to Forbes. He is known as an opportunistic bottom fisher who swoops in and seizes distressed assets at below-market value.

In the case of Regal, Anschutz paid about 70 cents on the dollar for the debt. His plan involves restructuring the debt with the banks at favorable terms that would allow the theaters to eventually be profitable.

Typically in bankruptcy reorganizations, debt holders convert their interests to equity positions that can give them control.

The exhibition business is expected to turn around in the next two years as circuits complete their financial restructurings and shut down unprofitable theaters and renegotiate less-expensive leases.

“You’re buying assets that you couldn’t replace at those costs and you’re doing it at a cost basis where you can make money,” said the former head of a now-bankrupt theater chain.

A source familiar with Anschutz’s theater acquisitions acknowledged Wednesday that his moves have been “opportunistic investments in a depressed industry” and insisted that the moves were not part of a master plan to position Anschutz as a media mogul.

Still, his escalating activities in entertainment have triggered speculation that someday his collection of assets may serve as the foundation for a nontraditional media company with a different configuration of properties that, for example, marry fiber-optics technology with theaters.

Through his Denver-based holding company Anschutz Investment Co., the 60-year-old is the largest shareholder in Denver telecommunications giant Qwest Communications International, which owns fiber-optic networks.

About a year ago, Anschutz formed a small Beverly Hills-based movie production house called Crusader Entertainment, to focus on low-cost family films.

His Anschutz Entertainment Group is one of the nation’s largest sports entertainment companies. The group owns the Kings, has more than a 50% stake in Staples Center in downtown Los Angeles and owns 25% of the L.A. Lakers, two minor-league hockey teams, four professional men’s soccer teams, five European hockey teams, the London Arena and Concerts West, a small concert-promotion company. Anschutz will operate the Kodak Center under construction in Hollywood and does the exclusive booking for the Forum.

Anschutz also is building a hotel and retail complex, which will include a 7,000-seat theater, across from Staples Center.