Panavision Struggles With $300M Debt Load By CARLOS MARTINEZ Staff Reporter Troubled movie camera-maker Panavision Inc. hopes to sell $200 million in secured notes to pay off a growing debt that has become difficult to manage. The Woodland Hills-based company has struggled to service its nearly $300 million debt amid an economic downturn and a decline in movie production. Most of the TV and film industry relies on Panavision for the rental of its cameras and related equipment. Panavision’s debt troubles are not new. When billionaire investor Ronald O. Perelman purchased an 87-percent interest in the company, he transferred about $340 million in debt to it from his PX Escrow Corp. That outstanding debt, along with other loans and a subsequent decline in revenue and market share, has forced Panavision to make the latest offering, company officials said. The offering is tentatively scheduled for later this month. Panavision currently owes $277.3 million in notes that fall due in 2006. The company had initially said it would issue $250 million in secured notes to pay that debt, but last week reduced the offering amount to $200 million. The company did not give reasons for the change. Panavision spokesman Tony Shaffer By CARLOS MARTINEZ Staff Reporter Troubled movie camera-maker Panavision Inc. hopes to sell $200 million in secured notes to pay off a growing debt that has become difficult to manage. The Woodland Hills-based company has struggled to service its nearly $300 million debt amid an economic downturn and a decline in movie production. Most of the TV and film industry relies on Panavision for the rental of its cameras and related equipment. Panavision’s debt troubles are not new. When billionaire investor Ronald O. Perelman purchased an 87-percent interest in the company, he transferred about $340 million in debt to it from his PX Escrow Corp. That outstanding debt, along with other loans and a subsequent decline in revenue and market share, has forced Panavision to make the latest offering, company officials said. The offering is tentatively scheduled for later this month. Panavision currently owes $277.3 million in notes that fall due in 2006. The company had initially said it would issue $250 million in secured notes to pay that debt, but last week reduced the offering amount to $200 million. The company did not give reasons for the change. Panavision spokesman Tony Shaffer said proceeds from the offering would go toward the debt, with additional funds provided from a new credit agreement the company is seeking. Shaffer would not say how much the company would save in interest payments if the new offering is successful. Last year, Panavision lost $14 million on $190.8 million in revenue, compared to a year earlier when it lost $23 million on $204.6 million in revenue. But perhaps most telling is the fact the company last saw an annual profit in 1997, the year Perelman acquired the firm. As part of an effort to bolster its finances, last month Panavision offered to pay off most of its outstanding debt at 65 cents on the dollar. But that effort backfired when Standard & Poor’s viewed the offer as tantamount to a default and lowered the company’s credit rating from single B to double C. Shortly thereafter, on April 9, the company withdrew the offer without explanation. Bob Berzin, an analyst with Lehman Brothers, said Panavision even with a lower credit rating is on the right track in trying to deal with its massive debt load. “By selling these notes, they can pay off that debt that’s been killing them,” he said, noting that the company’s outlook for its core business of camera manufacturing and rentals is improving with an anticipated ramping up of production in Hollywood. “I’m sure there’ll be takers out there for this offering,” Berzin said, noting that the company should benefit from lower interest rates and improved revenue both of which should attract bond investors. While Berzin said some investors are likely to be attracted by the latest offering, he noted that others may hesitate to get involved in a company so influenced by Perelman’s past financial dealings. “It doesn’t help when you have investors losing faith in the chairman of the company,” said Berzin, referring to Perelman. Perelman has been widely criticized for moves that appear to have benefited himself at the expense of other stockholders. Last year, for instance, Perelman was sued by stockholders of M & F; Worldwide Inc. after he sold 7.3 million shares of Panavision stock to M & F;, a company he controls, for $17.50 per share, or for about $123 million. At the time, Panavision shares were trading at about $4 a share, prompting some angry investors to claim Perelman engineered the sale to salvage a bad investment. Perelman has denied those allegations. Panavision stock closed at check on Friday PVI. In February, M & F; reached an agreement to pay $2.15 per share to those who held M & F; stock prior to the April 23, 2001 deal with Perelman. The total cost of the settlement is about $6 million. Ironically, M & F; has nothing to do with cameras or the film business. It’s a worldwide producer of licorice and licorice flavorings for tobacco products, based in New York City. Panavision’s primary revenue comes from the rental of its sophisticated Panaflex cameras and related accessories. Panavision manufactures, but does not sell its equipment. It also operates a lighting equipment rental unit. Some analysts, like Bob Davis of Atlantic Group, say Perelman’s moves to unload his stake in Panavision on another company he controls shows a pre-Enron way of thinking. “It’s curious that Perelman is still operating this way, given the scrutiny facing corporations after the Enron scandal,” he said. Despite his maneuverings, some of Perelman’s investments have taken a beating in recent years. His stake in Revlon has shrunk from about $250 million two years ago to $58.2 million today. His 13-percent stake in Sunbeam Corp. is also endangered as the company reorganizes under a Chapter 11 bankruptcy filing.
