Carl Icahn Won't Stop Torturing Lionsgate--Even After Debt Deadline*

UPDATE: We just spoke to John Kornitzer, who told us that he didn’t sell any of his bonds to Icahn and doesn’t intend to change his mind. He says if he hangs onto his bonds he gets a 23% return from now to 2013, so he sees no reason to sell them.

EARLIER: It’s been relatively quiet on the Carl Icahn-Lionsgate front, but come Monday, the world will likely know what’s next in his plan to torment the studio.

By the end of the day Monday, Icahn’s offer to acquire $325 million of Lionsgate’s debt will have expired, and he’ll have to decide whether the bonds he’s gotten so far are enough or whether he’ll extend the offer.

We don’t know how many takers Icahn’s gotten, but the company’s largest debtholder, John Kornitzer, very publicly—and vehemently—denied he was interested in selling his stake.

“I’m not going to sell him any [expletive] bonds,” he told the LA Times last month.

Richard Dorfman, CEO of New York-based investment firm Richard Alan Inc., said he thinks if Icahn gets anything less than 50% of what he asked for, he’ll extend his offer.

Icahn has to acquire enough bonds, Dorfman says, “to force Lionsgate into making certain moves he could only do if he was a debt investor.” If he gets $175 million of the company’s debt, this would make him the company’s largest bondholder, and then he’d be in a position to have some real influence over Lionsgate’s operations. In particular, with this much of an investment, if the company defaulted on any of its debt covenants, Icahn would then be in position to take over the studio, Dorfman notes.

Dorfman still believes Icahn wants to create some major changes at the company, and the best way for him to do that is to keep trying to acquire the company’s debt. If he gets all of the debt he asked for, he would have a roughly 30% stake in the company. He could only buy 19.9% of Lionsgate equity without triggering Lionsgate’s change of control provision.

But Natixis Bleichroeder senior analyst Alan Gould doesn’t think Icahn will actually be able to get any control over Lionsgate’s operations. He notes that four entities own roughly 50% of the company: Icahn, his former protege Mark Rachesky, Steinberg Asset Management and Capital Research Global Investors. Gould doesn’t see any of the other three owners siding with Icahn and giving him enough votes to get the influence over the studio he desires.

Still, Gould predicts Icahn will extend his debt offer on Monday. “I haven’t seen him give up and walk away from these issues,” he says.

This could be a long, possibly fruitless fight, and since Icahn said he could make the decision to extend his offer between the market close on the day it expires and 9 a.m. the next morning, it could be a long Monday night at Lionsgate.

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