Can Sumner Redstone Keep Media Empire Afloat?

RENEE MONTAGNE, host:

One of the world's biggest media moguls has been hit especially hard by the economic downturn. Now many are watching to see how Sumner Redstone tries to get out of the jam. NPR's Kim Masters reports.

KIM MASTERS: Sumner Redstone is an irascible 85-year-old billionaire who can truly lay claim to the title of mogul. Starting with a theater chain, he built and acquired a media empire that includes CBS and Viacom, the parent of Paramount Pictures, Comedy Central, and Nickelodeon. He's had all sorts of family drama including a splashy feud with his daughter Shari, one time seen as his heir apparent. But Redstone has proclaimed that he is still in charge and intends to remain that way, possibly forever. Here he is in a July appearance on CNBC describing his doctor's appraisal.

Mr. SUMNER REDSTONE (Chairman, National Amusements): I had serious prostate cancer. Total recovery. You know what he said when he was interviewed? Sumner scared cancer to death.

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MASTERS: Redstone has scared a lot of people for a long time. But now he may have reason to worry himself. Of all the big media players, he's had the most visible problems related to the economic meltdown. Redstone owns a company called National Amusements, and that company holds his stock in CBS and Viacom, among other things. Last week, National Amusements announced unexpectedly that it had sold, or you might say dumped, $233 million worth of that stock. The reason was a 1.6 billion - that's billion - dollar debt. The company had violated the terms of its loan. Securities analyst Joe Bonner says it's not clear how.

Mr. JOE BONNER (Securities Analyst, Argus Research): What we don't know is what the trigger was in those debt provisions.

MASTERS: Even after that sale, analyst Rich Greenfield says Redstone still has problems. His company is supposed to repay at least half of that debt, about $800 million, by mid-December.

Mr. RICH GREENFIELD (Analyst, Pali Research): And therefore, he needs to figure out a way to refinance that debt over the course of the next 60 or so days.

MASTERS: In a worst-case scenario, one that most analysts consider highly unlikely, Redstone could be forced to sell off more stock, so much that he loses control of CBS or Viacom or both. Greenfield thinks it's far more likely that the banks will restructure the loan.

Mr. GREENFIELD: But that being said, we're in an unprecedented environment for debt or accessing the debt markets. And so, it's anyone's guess as to whether this really happens or not.

MASTERS: Even if the debt is restructured, it's not clear that CBS and Viacom can then sail serenely on. Greenfield has just tagged CBS stock with a sell recommendation. He thinks the weak advertising market will hurt the company a lot. Joe Bonner takes a contrarian view.

Mr. BONNER: Yes. They are exposed to the ad market. But the fact is that they still have good cash flow to fund that dividend. And I think the management of the company is actually doing a very good job.

MASTERS: Greenfield thinks Viacom stock is the better deal.

Mr. GREENFIELD: People have given up on it, but I do think that this is a fairly solid business that people aren't giving enough credit, especially to assets like Paramount where, you know, it really has no value reflected in today's stock price.

MASTERS: Some critics are wondering how Sumner Redstone got into this jam in the first place, and they say he's made some moves in recent years that haven't worked out well. The Wall Street Journal recently ran an article suggesting that he sell Viacom since a new owner might do a better job for shareholders. But that article noted that Redstone began his 2001 autobiography with the words "Viacom is me," which suggests that Redstone would not want to sell with the market at the bottom, the top, or anywhere in between. Kim Masters, NPR News. Transcript provided by NPR, Copyright NPR.