MGM said to consider prepackaged bankruptcy

Bond News - 10-03-10

With about 10 days to go before the next round of bids are due, Metro-Goldwyn-Mayer is still considering other options to help reorganize its almost $4 billion debt load. They include a potential stand-alone bankruptcy plan, people with direct knowledge of the matter said Tuesday, Michael J. de la Merced reports in The New York Times.

MI6 Note: It is unclear whether or not a bankruptcy situation would free EON Productions to shop the James Bond franchise to another studio. If not, the process could stall development on Bond 23 for a protracted period.

MGM put itself up for sale last fall as part of an effort to pay off the debt it took on in a $5 billion leveraged buyout in 2004. Its 4,000-title film library and rights to the James Bond series and “The Hobbit” have attracted the eye of rival studios and private equity firms. But potential buyers have signaled that they were willing to pay only about $1.5 billion or so.

That may lead to MGM considering filing for a prearranged bankruptcy that would involve its creditors taking over the studio in exchange for forgiving their debt, these people said.

MGM has been working on potential alternatives to a sale for some time, having hired advisers like the boutique investment bank Moelis & Company and the law firm Skadden, Arps, Slate, Meagher & Flom. In August, it hired the restructuring expert Stephen F. Cooper to help lead the company.

While a forbearance agreement MGM has struck with its lenders will expire on March 31, the company is likely to seek yet another extension of that agreement, one of these people said. But the studio must also contend with a $250 million revolving credit facility that matures early next month, this person added.

Any final decision is likely to come after March 31, this person said. An MGM spokeswoman, Susan Arons, declined to comment.

MGM has faced several complications in its efforts to reorganize its debt. Its lender group has about 140 members, led by JPMorgan Chase.

Questions have also arisen over the prospects of MGM’s business, given the poor performance of its sole release last year, a remake of “Fame.” It has several movies lined up for release this year, including the comedies “Hot Tub Time Machine” and “The Zookeeper.”

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