Lions Gate swap with holders of 3.625% convertibles may help prevent Icahn plans

By Rebecca Melvin

New York, April 22 - Lions Gate Entertainment Inc.'s move earlier this week to lock up $66.6 million of its 3.625% convertibles with two of its largest bondholders may help the film and television studio prevent activist investor Carl Icahn from pursuing plans to exert more control over the company.

Lions Gate exchanged its existing 3.625% convertible senior subordinated secured notes due 2025 for new 3.625% convertible senior subordinated secured notes due 2025.

The only difference between the old and new notes is that the new paper pushes out the put to 2015 from 2012 and lowers the conversion strike to $8.25 from $14.28, Peter Wilkes of Lions Gate investor relations told Prospect News.

The new lower conversion "makes it more of an equity play, as it's pretty likely that they would be in the money between now and 2015," Wilkes added.

As part of the swap, one holder also agreed not to tender any of their 2.9375% convertible senior subordinated notes due 2024 into the tender offer being held by some affiliates of Icahn.

As previously reported, Icahn's group is offering $750 for each $1,000 principal amount of the 2.9375% convertibles and $730 for each $1,000 principal amount of the 3.625% convertibles.

The exchange was accomplished on $66.6 million of $166 million outstanding of the 3.625% convertibles. Nine million dollars worth was bought back Dec. 31, Wilkes said.

"We viewed this as a good opportunity to do with two of our major bondholders as it strengthens the capital structure of the company," he said.

But the move may also help the company hold Icahn, who owns 20% of the stock in Lions Gate, at bay, preventing him from accumulating debt in the company, and potentially accelerating repayment of the debt.

On Tuesday, Icahn announced that he has extended his tender offer to May 1. The offer, which was launched March 12, had been set to expire on Monday.

The tender was launched after Icahn's talks with the studio to gain seats on the 12-person board stalled.

Mr. Icahn announced that less than $9 million of the company's debt had been deposited pursuant to his tender offer.

Lions Gate Entertainment Inc. is a Santa Monica, Calif.-based subsidiary of Lions Gate Entertainment Corp., which is a filmed entertainment studio with headquarters in Vancouver, B.C.

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