The Redstones and the mystery of the debt covenants

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The bitter feud between billionaire Sumner Redstone and his daughter, Shari, erupted again Tuesday over the murky circumstances surrounding the sale of $233 million in non-voting Viacom Inc. and CBS Corp. shares by the family’s privately held National Amusements Inc.

Last Friday, National Amusements disclosed that it needed to raise cash to comply with debt covenants on a $1.6-billion loan. The purpose of the loan is unclear, and the firm has declined to provide an explanation. On Tuesday, the Wall Street Journal reported that the money was needed in large part to expand National Amusements’ chain of 1,500 movie theaters, which is run by Shari Redstone.

Dedham, Mass.-based National Amusements late Tuesday — at Shari Redstone’s urging — released a carefully worded statement that appeared to take issue with the Journal’s story.

“National Amusements’ recent sale of a portion of its Viacom and CBS non-voting stock was the direct result of last week’s historic financial crisis, which included the precipitous drop in value of CBS and Viacom stock,” the statement said. “The implication that this stock sale was required by the operation and expansion of the company’s theater circuit is not accurate.”

Sumner Redstone, 85, is chairman of Viacom as well as CBS, and he controls 80% of National Amusements. Shari Redstone holds the other 20%. Last year, the two Redstones battled publicly over issues of corporate governance and succession at Viacom and CBS.

Shari Redstone was once thought to be the heir apparent to her father; however, the octogenarian mogul publicly dismissed the notion that his daughter “automatically” would succeed him. Since then, the two sides have engaged in talks to potentially sever their business ties. But the talks seemed to have stalled.

The drama unfolds as the family’s empire has lost value. Viacom and CBS shares are down more than 50% since the beginning of the year.

-- Claudia Eller