*Squeeze on Sumner

On a day that has seen bleakness most everywhere – another tough session on Wall Street, Mervyns being liquidated, Zillow having to lay off workers, etc. - it's hard not to crack a smile over news that Sumner Redstone is in trouble. Investors at Viacom and CBS, the two media giants he controls, want to know why one of L.A.’s richest men (for now anyway) had to sell $233 million of stock in those two companies last week, apparently to satisfy a loan covenant involving his privately held colossus, National Amusements. A just-posted WSJ story says that National Amusements has a year-end deadline to repay about half of its $1.6 billion in debt. What concerns shareholders is that Redstone will have sell more shares of Viacom and CBS, and that will lead to further drops in their stock price.

A privately held company that houses the Redstone family's controlling stakes in Viacom and CBS, National Amusements has rarely released information about its finances. On Friday, it said management "is engaged in constructive discussions with its bank group and noteholders regarding a covenant issue under National Amusement's debt, which is unsecured." It added: "the issue resulted from recent unprecedented market volatility which led to a precipitous drop in the value of the CBS and Viacom shares."

[CUT]

One question the sale of stock raised is how National Amusements accumulated so much debt. People familiar with the situation said the $1.6 billion of debt was a combination of debt taken on to acquire Viacom; expansion of the movie theater chain; Mr. Redstone's acquisition of stock in videogame company Midway Games Inc.; and the $240 million settlement of a case to buy out Mr. Redstone's son Brent from the holding company. People familiar with the situation said the debt didn't finance Mr. Redstone's settlement of his divorce from former wife Phyllis, as some have speculated.

This could get interesting.

*Redstone has been telling friends that he is separating from his wife, Paula Fortunato, the LAT reports. There were reports some months back about the five-year marriage being on the rocks. Redstone has also been feuding with his daughter Shari, who runs National Amusements.