Cannon Agrees to Sale, Lease-Back Realty Deal

In a deal that promises Cannon Group major financial relief, the debt-laden Los Angeles independent movie firm said Friday it has agreed to sell and lease back its theaters and other real estate for “a minimum” of $300 million.

The buyer, Renta Inmobiliaria, was identified as a publicly traded Spanish real estate company controlled by Interpart S.A. of Luxembourg, Cannon’s new European investor.

At the same time, Warner Communications and Cannon said they agreed to abort a deal they signed last December that gave Warner an option to pay $50 million for 50% of Cannon’s overseas theaters.

Cannon said it will lease back all of its European theaters and the Elstree movie studio in London, as well as its Commonwealth theater chain in the Midwest and its Los Angeles headquarters building.

Trimming of Debt

The bulk of the proceeds from the sale/lease-back deal will be applied toward Cannon’s U.S. and European bank debt, the company said, including $50 million of U.S. bank debt guaranteed by Warner.

Also, the cash infusion is expected to make it easy for Cannon to meet an $11.7-million interest payment due next Thursday to bondholders, plus $3 million due Nov. 1.

Friday’s announcement was the biggest move yet made by Cannon since it acquired European investors last May.

At that time, Menahem Golan and Yoram Globus, Cannon’s top executives, joined as equal partners of Interpart in Intercorporation S.A. Public filings in this country said Intercorporation was organized as a vehicle to restructure Cannon’s financing.

European businessmen Giancarlo Parretti and Frederic G.E. Scheer are officers and directors of Interpart. Scheer has since become senior vice president and chief financial officer of Cannon and Parretti an executive vice president.

‘Pretty Good’ Price

Cannon cautioned that its deal is subject to approvals from its U.S. banks as well as U.S. and European governments.

The price Cannon is getting for its real estate is “pretty good,” commented Lisbeth R. Barron, a research vice president at Zorn Balis Gerard Inc., a New York investment firm. She said she understands that the lease-back cost to Cannon is expected to be 8% or 10%, which is slightly less than the present interest cost of Cannon’s debt on the properties.

As compensation for terminating last December’s agreement, Warner will receive 750,000 10-year warrants to buy Cannon shares at $8 each, in place of 500,000 five-year warrants at $15 each.

Separately, the parties said, the Warner Bros. subsidiary has acquired the U.S., Canadian and Australian rights to distribute Cannon’s motion picture “Evil Angels,” starring Meryl Streep and being produced in Australia for fall release.