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MGM puts skeptics at ease

Studio in 'full compliance' with debt requirements

In a move designed to quiet the doomsayers, MGM’s received a clean bill of financial health — for now.

The Lion announced Wednesday that it is in “full compliance” with all requirements on its massive $3.7 billion debt load, which comes due in mid-2012. And 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 that doesn’t mean that it’ll be smooth sailing ahead for the studio.

MGM’s statement contained no mention of plans to move ahead with its more recognizable properties — the two “Hobbit” movies it’s due to co-finance with Warner Bros. and the 23rd installment in the James Bond franchise. Many in Hollywood are skeptical that the Lion can find the coin to do so, as it’s widely believed that the tight credit markets have hampered MGM’s ability to raise additional production funds this year.

MGM didn’t elaborate as to details of the opinion, issued three months after the studio hired investment bank Moelis & Co. to help restructure its debt (Daily Variety, May 15).

“Metro-Goldwyn-Mayer Inc. today delivered its March 31, 2009, financial statements to its lender group with an unqualified audit opinion along with a certification that MGM is in full compliance with all of its debt covenants,” the company said in a statement.

Its brief statement listed only a quartet of upcoming releases — a remake of “Fame,” a co-production with Lakeshore Entertainment due out Sept. 25; comic horror-thriller “The Cabin in the Woods”; “Hot Tub Time Machine,” a comedy starring John Cusack; and romantic comedy “The Zookeeper,” with Kevin James, set to begin shooting this summer.

In the wake of Moelis’ hiring, MGM insiders have insisted that the studio’s been attempting to be proactive by renegotiating with lenders the $3.7 billion in debt. It’s believed that the restructuring effort is aimed at extending the due date on its debt or orchestrating a debt-for-equity swap.

MGM was acquired in 2005 from Kirk Kerkorian in a $5 billion debt-and-equity deal by Sony, Comcast, Providence Equity Partners and TPG Capital. Harry Sloan became MGM’s chief exec in the fall of that year.

The studio currently brings in about $500 million a year from its library, which contains over 4,000 titles, but pays more than $250 million a year in interest alone on the debt. After Sloan tapped former Universal exec Mary Parent early last year as worldwide motion picture group chair, Parent’s been attempting to strike partnerships to co-finance some of MGM’s pricier pics.

Despite Hollywood’s ongoing concerns about the financial viability of the company, MGM has been active since Parent took the production reins in March 2008. In addition to “Fame,” “Cabin in the Woods,” “Hot Tub Time Machine” and “Zookeeper,” studio has been developing remakes of “Robocop” and “Red Dawn” along with a feature version of Robert Ludlum’s “The Matarese Circle.”

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