National Amusements Inc said last week it was in talks with bankers to renegotiate terms on a $1.6 billion debt, due to a sharp drop in the value of CBS and Viacom, the collateral used on the loans.
The $1.6 billion debt was arranged by Bank of America and others. Half of that, $800 million, will need to be repaid by year's end.
At issue is a covenant that requires National Amusements to maintain a certain debt-to-asset ratio, which it failed to do after shares of Viacom and CBS plunged during the current credit crunch.
There are huge tax advantages to borrowing against a stock position rather than selling stock outright, but a Bear Market will make you hate the day you thought it was such a great idea.
