UPDATE 4-Icahn says Lions Gate may be headed for bankruptcy

Fri Jun 11, 2010 3:37pm EDT

* Icahn says Lions Gate has ignored offer of bridge loan

* Lions Gate says it has "strong balance sheet"

* Shares down 0.3 pct on Friday afternoon (Adds statement from Lions Gate)

By Franklin Paul and Alex Dobuzinskis

NEW YORK/LOS ANGELES, June 11 (Reuters) - Lions Gate Entertainment Corp (LGF.N) may be flirting with bankruptcy, according to Carl Icahn, the billionaire investor attempting a hostile takeover of the movie studio.

But the company fired back to say it had a "strong balance sheet and ample cash" to continue operations, and has been in discussions with creditors to avert a potential debt default.

Icahn, who has launched a $7-per-share offer for control of the mid-sized Hollywood player behind "Saw" and "Mad Men" and accused the studio of overspending and mismanagement, owns nearly 19 percent of the company.

Under the terms of Lions Gate's $340 million credit facility, any investor gaining more than 20 percent of the studio could trigger a technical default. Icahn has received tenders for another 3.7 percent of company shares, and on Thursday, billionaire shareholder and Dallas Mavericks owner Mark Cuban said he will likely tender to Icahn. He owns 5.4 percent of the company's shares.

If Lions Gate cannot find other funding or convince its lenders to waive defaults, it "may find it necessary to pursue a voluntary bankruptcy filing," Icahn wrote in an open letter to the Lions Gate board on Friday.

"As one of the largest -- and, I believe, soon to be the largest -- shareholder of Lions Gate, I am extremely concerned about this possible eventuality and I would imagine that other shareholders are similarly afraid of having their equity wiped out," Icahn said in the letter.

In its response, Lions Gate said it is in discussions with lenders to seek a waiver or amendment to its credit facilities to prevent any default, and "is confident in its ability to obtain one in the near future if necessary."

Icahn also noted that he has offered bridge financing to help the company refinance its debt and that Lions Gate has ignored the offer. But Lions Gate, suggesting it had not seen such an offer, said it would "welcome the opportunity to review the actual terms of a proposed bridge facility."

Lions Gate's board has argued that Icahn's offer of $7 a share for the company is too low. [ID:nN01134314]

Its shares were down 2 cents or 0.3 percent at $6.97 on the New York Stock Exchange on Friday afternoon.

Icahn has held Lions Gate shares since 2006 and has criticized management on the performance of the stock, which has fallen from a high of $12 in 2007 to around $7.

Analysts expect that Lions Gate would obtain a waiver, but it would be a hindrance for management. (Reporting by Franklin Paul and Alex Dobuzinskis, editing by Matthew Lewis)

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