MGM taps bank on debt

Lion looking to cage its big burden

MGM has hired investment bank Moelis & Co. to help restructure its substantial debt.

While skeptics view the move as one of desperation, an MGM insider insisted that’s not the case, adding that the studio is trying to be proactive and renegotiate with lenders its looming $3.7 billion IOU, which comes due in 2012. Through restructuring, MGM is aiming to extend its debt or orchestrate a debt-for-equity swap.

Studio currently reaps about $500 million a year from its library. However, MGM pays more than $250 million a year in interest alone on the debt. That has left worldwide motion picture group chair Mary Parent scrambling to strike partnerships to co-finance some of MGM’s pricier pics.

“We have this debt, and it has to be dealt with,” the insider said. “We have an opportunity. Why not get out ahead of this? We don’t want it to snowball.”

Still, it remains unclear whether the studio will be able to strike more favorable deal points amid a global economic downturn. However, a flurry of deals over the past week indicate that the credit markets are loosening.

In a statement, MGM said its cash flow for the fiscal year ended March 31 was “in line with its budget, and that the company is in compliance with all loan covenants.” Furthermore, the studio “is committed to its business plan, which calls for it to remain independent, continue its motion picture production and television activities and leverage the value of its film library.”

Despite the daily obituaries being written about the company, MGM has been anything but idle since Parent took the production reins in March 2008. Company is in post-production on one movie (“Fame”), shooting two (“The Cabin in the Woods,” “Hot Tub Time Machine”) and is in pre-production on one (“The Zookeeper”). A “Three Stooges” film and a “Red Dawn” remake are right behind in pre-production.

Want to read more articles like this one? SUBSCRIBE TO VARIETY TODAY.
Post A Comment 0

Leave a Reply

No Comments

Comments are moderated. They may be edited for clarity and reprinting in whole or in part in Variety publications.

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

More Biz News from Variety