Cash-strapped Loews Cineplex has retained a leading corporate distress specialist, indicating that the exhibitor is preparing to file for bankruptcy protection.

New York-based Loews Cineplex has opened its books to investment bank GE Capital so that it can prepare a so-called "debtor in possession" financing structure. Under "debtor-in-possession" guidelines, the debtor is in a position similar to a Chapter 11 trustee and thus has a legal responsibility to act in the best interests of its creditors, not in its own best interest.

The company, which operates 2,960 screens in 376 locations in the US, Canada and Europe, may choose to file for protection in the US, Canada or both. This step would allow Loews to walk away from leases in unprofitable locations.

The move comes during a cash crunch that has hit much of the North American exhibition industry after a spate of an expansion. Three major US circuits have filed for bankruptcy protection: Edwards Theatres, Carmike Cinemas and United Artists.

Loews faces a series of crucial dates, beginning January 26, the expiry date of the extension provided by its principal creditors. On February 1, a $13.3m payment is due to bond holders.

Canadian tycoon Gerald Schwartz has expressed an interest in buying part of the company's Canadian operation Cineplex Odeon. Schwartz owns a share of Canadian exhibitor Galaxy Entertainment.