Lion has paws out for equity infusion
Metro-Goldwyn-Mayer announced Friday that increased television production and a couple of disappointing domestic film releases widened the studio’s net loss in the second quarter to $55 million on revenues of $280 million.The Lion also said it is seeking a $250 million equity infusion — most likely a rights offering — the approval of which is expected within days. Although results for the quarter ended June 30 were in line with analyst expectations, MGM deemed inappropriate comparisons with the year-earlier quarter, in which the studio lost $14.8 million on sales of $153.4 million, because of its subsequent acquisition of Orion Pictures. MGM, described by an insider as “virtually lifeless” before it bought Orion in July 1997, has since gone public and committed itself to a full slate of theatrical releases. The strongest of those releases — the James Bond thriller “Tomorrow Never Dies” and Leonardo DiCaprio starrer “The Man In The Iron Mask” — contributed heavily to second-quarter revenues. “Tomorrow,” released internationally during the second quarter, is approaching a worldwide B.O. of $360 million, and “Mask,” one of the studio’s three domestic releases during the quarter, is up to $153 million, about two-thirds of which is from overseas. The Lion nonetheless took a $34 million write-down in the quarter, mostly due to the dismal performance of its two other domestic films, “Dirty Work” and “Species II.” Meanwhile, the studio’s renewed commitment to television production elicited surprising interest in the quarter from cablers, broadcasters and syndicators. Showtime Networks re-upped for 44 new episodes of MGM’s “Stargate SG-1,” 32 new episodes of “The Outer Limits” and 22 new episodes of “Dead Man’s Gun.” In addition, CBS renewed “The Magnificent Seven” for midseason, and the soon-to-launch PAX NET asked MGM to match the 44 “Flipper” shows already in syndication. The Lion also is gearing up for the fall syndication of two new animated series — “The Lionhearts” and “RoboCop: Alpha Commando” — while “LAPD: Life on the Beat” returns to for a fourth season. As for movies, the Lion reported that principal photography for nine films on its project roster should be completed by the end of this month. The studio acknowledged the unusual amount of activity by noting some projects had been rushed into production in anticipation of an actors’ strike that never materialized. All these broadcast and theatrical commitments, which drain cash flow and can take years to pay off, combined with smaller-than-expected revenue flows from the syndication and homevideo markets, have resulted in MGM’s drawing down $1.145 billion of its $1.3 billion credit facility. A capital infusion such as the anticipated rights offering should make lenders more receptive to expanding the credit line by strengthening the studio’s balance sheet. Billionaire investor Kirk Kerkorian, who owns 65% of MGM through his Tracinda Corp., has already agreed to subscribe to his pro-rata share of just such an offering. The endorsement is noteworthy in that Kerkorian is as famous for standing behind his investments as he is for walking away with $5 billion once Daimler-Benz’ takeover of Chrysler is completed. The proposed merger received The European Union’s blessing Thursday. Seven Network, with a 25% stake in the studio, said it supports the rights offering as well. Rather than subscribing, however, the Australian cabler indicated it would work out a one-year option with Tracinda for the opportunity to maintain its ownership. MGM shares lost 75¢ a share Friday to close at $21.13.