Ending weeks of uncertainty, Canadian billionaire Gerald Schwartz and two US partners have struck an $850m (C$1.3bn) deal to acquire distressed exhibitor Loews Cineplex, the second-largest chain in North America.

One of the partners, LA-based Oaktree Capital Management, holds a large chunk of debt of another distressed circuit, Regal Cinemas, the continent's largest.

Details of the deal, which were released Thursday, indicate that Schwartz's Toronto-based Onex Corp has joined forces with Oaktree and US billionaire Gary Winnick's Pacific Capital Corp to convert bank debt they jointly hold into equity. But first the circuit will file for bankruptcy protection in both Canada and the US and then present the exit strategy and new owners as a package to the bankruptcy courts.

Originally Schwartz had indicated an interest in buying the Canadian arm of the chain, Cineplex Odeon, but major stake holders Sony Pictures Entertainment, which holds 39.5% of the company's voting stock, and Vivendi Universal which holds 25.5%, are understood to have held out for an all-or-nothing deal. According to an Onex spokesperson, the three partners came together in January.

Meanwhile, Loews Cineplex announced plans to close approximately 21 theatres of its 365 facilities in the US immediately. In Canada, Cineplex Odeon will announce plans to close approximately 25 of its 114 theatres in the coming weeks. In all, the company plans to shutter 675 screens at 112 locations in the US and Canada, about 23% of its total. In a veiled warning to its landlords, the company said locations and timing of the additional closures will depend on the outcome of lease negotiations.

Commenting on the deal, Lawrence J. Ruisi, president and CEO of Loews Cineplex, said: "We believe the actions we are taking today will allow the company to move forward as a strong, well-capitalised entity with excellent sponsors at a time when many of our competitors in the North American film exhibition industry are experiencing severe financial constraints."