Media mogul Sumner Redstone, caught in the vise-like grip of the credit crunch, may be forced to sell his prized Viacom Inc., home of MTV, Nickelodeon and Paramount Studios.
A sale of Viacom, or any piece of the company, would be a tremendous setback to the 85-year-old Redstone, as he has spent the better part of his professional life pulling together the crown jewel of his investment portfolio.
Sources close to Redstone and Viacom say the executive’s current cash situation is so dire that selling Viacom or CBS – which he also controls – is now a real possibility. Redstone used shares in the companies as collateral for loans used to back expansion plans for his privately-held National Amusements, Inc. movie theater chain.
As the price of Viacom and CBS shares dipped, the banks are demanding cash to back the loans.
“Sumner needs more money,” said one source with knowledge of the situation. A second source described the situation as grim enough that the sale of pieces of CBS – like some radio stations, or the publisher Simon & Schuster – or some of the Viacom properties would not be enough to cure the cash shortfall.
That’s because if CBS sells a unit the proceeds from the sale would stay with CBS and not flow up to Redstone’s NAI.
However, proceeds from the sale of all of CBS would flow to NAI.
Despite the urgent need for cash, the sale of Viacom, CBS or any part of the companies is not a sure thing. Redstone, a master negotiator, could still head off a sale by renegotiating the terms of the bank loan, someone familiar with Viacom said.
A source close to CBS said that Redstone was already looking at his entire portfolio to identify possible sale candidates.
Viacom, this person said, is more valuable, but would be harder for Redstone to sell as he has carefully built the company over the years and considers its properties like his children.
There is less emotional linkage to CBS, making it easier for him to sell – but it would not bring in as much as Viacom would.
CBS, Viacom and NAI refused to comment on speculation about a possible sale.
Meanwhile, another margin call and Redstone could find himself kicked out of the billionaires club.
Already, the pounding Redstone’s Viacom, CBS, and Midway Games shares have taken would drop him from No. 66 to No. 246 on the Forbes list of wealthiest Americans, based solely on his stock holdings.
Another $600 million haircut and Redstone could fall off the list entirely.