Studio unveils management shakeup
MGM’s moves on Tuesday may please investors who’d fretted about Leo’s $3.7 billion in debt. But the shakeup does little to enhance the Lion’s reputation as a place to make movies.
To appease its debt holders, MGM took Harry Sloan out of the CEO slot and brought in corporate-turnaround specialist Stephen Cooper — ending Sloan’s four-year effort to resurrect MGM as a major studio.
Cooper, who was also named vice chairman, begins work immediately with the marching orders to “lead MGM’s efforts to evaluate alternatives to improve its balance sheet.” That’s a serious challenge amid continued tight credit and the ongoing uncertainty surrounding the film biz.
And it raises questions about the fate of the studio’s primo assets, including its library, its deal for the James Bond films and its stake in “The Hobbit” movies.
While many industry observers speculated that the arrival of Cooper will take MGM out of the movie-financing biz, at least for the short term, Lion execs stressed that they’re sticking with the projects initiated by Mary Parent since she joined the company early last year.
Motion picture group chief Parent, who is 15 months into a four-year deal, indicated she’ll continue to work on a slate of six to eight pics per year.
She is part of the newly created “office of the CEO,” with responsibilities divided among her, Cooper and chief financial officer Bedi Singh. Sloan will continue as nonexecutive chairman of the board.
MGM hasn’t released a film since last December’s “Valkyrie,” which grossed $200 million worldwide. It’s understood that Parent had an option in her contract to exit the company but opted to hang in and shepherd her slate.
In the press release announcing the shakeup, MGM made a point of noting that it that co-owns and will co-produce “The Hobbit” with exec producers Peter Jackson and Fran Walsh and New Line. MGM will also release the next installment in the James Bond series, which will be produced by Michael G. Wilson and Barbara Broccoli of EON Prods.
However, there’s already been speculation that New Line is looking for a new partner on “Hobbit” and that the Bond franchise could be an asset that Cooper may look to auction off to help pay down debt.
In recent months Parent has been attempting to strike partnerships to co-finance some of MGM’s pricier pics. Its next scheduled release is the “Fame” remake, set to open Sept. 25, followed by “Cabin in the Woods” on Feb. 5, “Hot Tub Time Machine” on Feb. 26, “Red Dawn” in September 2010, “Zookeeper” in October 2010 and “Poltergeist” in November 2010.
Industry insiders speculated that Parent’s job may be made tougher in some cases by Cooper’s larger agenda of restructuring the debt.
Cooper faces a daunting task in his latest assignment, with $3.7 billion in MGM debt set to mature in 2012. Some of it comes due next year.
MGM was acquired in 2005 from billionaire Kirk Kerkorian in a $5 billion debt-and-equity deal through a consortium of investors led by Sony Corp. that also included Comcast, Providence Equity Partners, Texas Pacific Group and DLJ Merchant Banking Partners.
The investors brought in Sloan, a Hollywood veteran who had run New World Pictures and founded European broadcaster SBS, to revive MGM, but the capital structure made that a difficult task at best. Sony and Comcast each own a 20% stake in the Lion.
The studio currently brings in about $500 million a year from its library, which contains more than 4,000 titles and includes the Bond and “Rambo” films. But it also pays more than $250 million a year in interest alone on the debt, most of which stems from the 2005 buyout.
Cooper oversaw Enron’s bankruptcy as interim chief executive and Krispy Kreme Doughnuts’ restructuring as CEO. He’s a co-founder of the restructuring firm Zolfo Cooper; other assignments have included auto parts maker Collins & Aikman and Hawaii Telecom, which filed for bankruptcy last year.
Sloan, who will continue as nonexecutive chairman and remain on the board, said Tuesday that the Lion has made “important progress” building MGM’s operations and executing growth initiatives over the last four years.
“MGM can now draw from the excellent team we have assembled and attract top talent such as Steve Cooper to help lead the company through its next phase,” Sloan said in a statement. “As an investor, I firmly believe that the team will work to bolster MGM’s operational and financial strengths during this challenging macroenvironment.”
The Lion received a clean bill of financial health a month ago when it announced it was in “full compliance” with all requirements on its debt load. At that point, its audit contained no warning about MGM’s viability as a “going concern,” meaning that the auditors view the studio as financially sound enough to continue operating. But the decision to recruit Cooper and nudge Sloan aside is a clear sign that debt holders were getting anxious, clean bill of health or not.
(Cynthia Littleton contributed to this report.)