Anschutz Close to Gaining Controlling Stake in Regal

Billionaire investor Philip Anschutz is close to taking control of the No. 1 U.S. theater chain, Regal Cinemas Inc., from two major private equity firms, Kohlberg Kravis Roberts & Co. and Hicks Muse Tate & Furst, sources familiar with the deal told Reuters.

As part of the deal, which is in late-stage negotiations, Regal would file for a “prepackaged” bankruptcy action and seek court approval for an arrangement that would give Anschutz a 60% stake in Regal’s equity, the sources said.

Denver-based Anschutz Corp., Philip Anschutz’s investment vehicle, and Los Angeles investment firm Oaktree Capital Management, hold a majority of Regal’s $1.8 billion in long-term debt. Much of that debt would be converted into equity under the terms of the bankruptcy deal, according to the sources.

The deal would enable KKR and Hicks Muse to wash their hands of a major disappointment that the firms jointly purchased in 1998 for $1.57 billion in cash and debt.

KKR, Hicks Muse, Regal and Anschutz declined to comment on any pending transaction involving Regal.

Like many theater chains, Regal in recent years went on a major expansion spree, making it the world’s largest theater chain with more than 4,000 screens.

Regal and other cinema chains over-saturated the market at a time when box office receipts are dropping because of competition from ever-larger cable television companies and rising studio costs, which made movies more expensive.