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The theater glut has claimed its latest victim. New York-based Loews Cineplex Entertainment, the second largest movie exhibitor in the US, filed for Chapter 11 bankruptcy protection on Thursday, February 15 in US Bankruptcy Court for the Southern District of New York. The theater giant simultaneously brought an application under the Companies' Creditors Arrangement Act before the Ontario Superior Court of Justice for its Canadian units, including Cineplex Odeon Corporation, with whom it had merged three years ago.

Loews follows its competitors United Artists Theatre Co., Carmike Cinemas, Inc., and Edwards Theaters Circuit, Inc., all of whom have filed for bankruptcy as a result of an oversupply of theaters.

Chapter 11 gives companies in trouble time to restructure debt. Loews almost immediately signed a letter of intent to be acquired by Toronto's Onex Corp., a publicly traded buyout firm led by CEO Gerald W. Schwartz. The restructuring of Loews' $1 billion in bonds and bank loans will give the new owners approximately $250 million in equity, or about 88% ownership. Sony Corporation (parent company of Columbia Pictures) and Universal Studios, who were 40% and 26% owners respectively, will reportedly get little from the deal; Sony's take may amount to less than $5 million. Sony recovered a substantial amount of its original $600 million investment in Loews when the theater chain merged with Cineplex Odeon in 1998. Universal Studios has pumped approximately $160 million into the operation since it first got involved in the 1980s. Small shareholders will probably get nothing. Loews' stock has lost more than 90% of its value in the past year.

Downsizing is an immediate goal to help the theater chain regain profitability; to the end, 21 American and 25 Canadian theaters will be closed shortly. Loews spokeswoman Mindy Tucker told reporters that the company would continue to operate under current management from its headquarters in New York and Toronto. Loews' board of directors, which includes nine seats occupied by Sony and Universal executives, voted unanimously in favor of the Chapter 11 filing and for issuing the letter of intent to sign with Onex.