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Lionsgate's Secures a Waiver from Lenders, Removing Risk of Default

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CNBC.com

As Lionsgate battles Carl Icahn's takeover attempts, the studio has secured a waiver from its lenders, led by JP Morgan Chase, removing the risk of default.

The new lender agreements raise the trigger threshold for the change of control covenant in Lionsgate's $340 million credit facility to 50 percent from 20 percent. This change is key because as of last week Icahn's $7 a share tender offer gave him control of 31.8 percent of Lionsgate shares.

Under Lionsgate's prior agreements, a shareholder gaining more than 20% ownership tripped a change of control covenant, which would trigger default provisions in over $400 million of debt.

This battle isn't over yet: Until June 30 shareholders can continue to tender to Icahn for seven dollars a share. If Icahn secures a 33 percent stake he will have the power to veto mergers or acquisitions. A 33 percent stake would also trigger a change of control clause in Lionsgate's CEO's employment contract, which would allow CEO Jon Feltheimer to resign, and would trigger the vesting of severance payments to him. Feltheimer has assured Lionsgate's board that despite the option of resignation, he intends to stay at the company.

The next deadline to watch is June 30 — we'll see how many other shareholders tender by then.

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