After producing over 3,000 titles and distributing over 4,000 since 1924, Metro-Goldwyn-Mayer (MGM) has filed for Chapter 11 Bankruptcy. The company was sold in a $2.85 billion leverage buyout in 2005 and has been struggling with too much debt since then. Private equity firms Providence Equity Partners, TPG Capital LP, Quadrangle Group and DLJ Merchant Banking Partners, as well as Comcast Corp and Sony Corp. were included in the buyout group.
A vote to support a “prepackaged” bankruptcy was approved by creditors with the special considerations of billionaire Carl Icahan , one of the company’s largest debt holders. Icahan had previously championed a merger with Lions Gate Entertainment and is now being sued for his involvement.
The current proposal puts control of MGM Gary Barber and Roger Birnbaum, the executive team in charge of Spyglass Entertainment. The new plan adopts changes in the corporate governance of the company and allows Icahan to appoint a board director after the bankruptcy is settled. Barber and Birnbaum will also be on the board with seven additional directors that will be named later by lenders.
Mr. Icahn said: “I am pleased that we were able to obtain an agreement to make changes to the MGM pre-packaged plan that allows me to support it and enables the company to avoid a potentially costly and disruptive bankruptcy process.”
MGM expects a federal judge to approve the changes within the month. Secured lenders, including Credit Suisse Group AG and JPMorgan Chase & Co, would be allowed to trade out more than $4 billion of MGM debt for most of the equity in a restructured company. The company plans to continue to raise funds, hoping to emerge from bankruptcy with $500 million. This will support operations like film and television series production.
If spending is approved in the following weeks, it will lead the way for a profitable agreement between MGM, Spyglass and Time Warner’s Warner Brothers to make the two-part prequal to Peter Jackson’s “The Lord of the Rings” Trilogy. Starting with “The Hobbit” the films will be shot back to back and have a budget of $550 million.
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By Heather Fairchild - Heather is a multimedia developer, business owner and work-from-home mom.