Financial Accounting Blog

Monday, June 07, 2004

Dividend Payments. A judge has given movie-theater operater Regal permission to pay a special $5 per share cash dividend to its shareholders. The Teachers Retirement System of Louisiana had petitioned the court to block the dividend payment arguing that it favored some shareholders at the expense of others. But since the dividend is paid on a per share basis, the judge ruled in favor of Regal. A writer at the Motley Fool doesn't like what this will do to Regals debt to stockholders' equity ratio...
Regal has less than $300 million on the balance sheet, and most of the payment will be financed through a restructuring of a $1.35 billion bank line of credit and the sale of $400 million in new subordinated notes. As a result of the transaction, both Moody's and Standard & Poor's have revised their credit outlook for Regal from stable to negative. After the dust settles, pro-forma debt will have risen to more than $2 billion, while equity is reduced to $94 million from $1.3 billion.