The dire state of debt-saddled Hollywood studio Metro-Goldwyn-Mayer Inc (MGM), which has been tinkering on the brink of bankruptcy for the last few years, is now beginning the slow trek towards a financial second life.
Late last Friday owners of the company’s whopping $US4 billion in debt voted in favour of a plan that will see it merge with Spyglass Entertainment, a smaller production studio buoyed by recent hits such as Star Trek and Get Him to the Greek.
The debt will be turned into equity under chapter 11 of the US Bankruptcy Code, which protects companies from creditors while they restructure/downsize.
MGM, which owns the rights to franchises such as James Bond and The Hobbit, said via statement released on Friday:
“The secured lenders voting in the Company’s solicitation process have overwhelmingly approved its proposed plan of reorganization (“Plan”). MGM will now move expeditiously to implement that Plan, which will dramatically reduce its debt and put the Company in a strong position to execute its business strategy.”
The only other widely reported option was for the studio to have been sold to 74-year-old billionaire investor Carl Icahn, who made two failed bids to buy up MGM and its debt — and already owns about US$800 million of it.
If the MGM debacle were turned into a movie, Icahn would probably be the villain. He is also the controlling shareholder of Lions Gate Entertainment Corp, the very company now suing him for what they claim was essentially an act of double crossing.
Lions Gate has accused Icahn of “making false and misleading statements” against propositions for a merger that might have reduced the value of his stocks, while at the same gunning for one that wouldn’t. It’s all very Gordon Gekko.
Says the Lions Gate federal court compliment, filed on October 28:
“Icahn opposed a merger with MGM not because it was bad for Lions Gate shareholders, but because it was good — so good, in fact, that he wanted to postpone it until he could buy as much of both companies as he could and thus extract for himself as much of the value stemming from the merger as possible.”
MGM will have around a month to prepare for the transition, which will make Spyglass co-founders Gary Barber and Roger Birnbaum the new MGM co-CEOs. They are expected to focus on making more smaller budget releases to minimise risks and begin a slow dribble back into the black.