Struggling MGM is taking the first formal steps toward reinventing itself, asking debtholders to approve a pre-packaged bankruptcy plan.
Under its provisions, Spyglass toppers Gary Barber and Roger Birnbaum would serve as co-chairmen and CEOs of MGM following the company’s emergence from Chapter 11. The pair also will join the Lion’s board of directors. Deadline for the lenders to vote is Oct. 22, unless extended.
Thursday’s announcement contained details of how the reorganization will be structured but did not include information about how MGM will fund operations once it emerges from bankruptcy. It said the plan, which requires approval by more than 50% of debtholders, will have the lenders exchange more than $4 billion in debt for 95.3% of equity in MGM upon its emergence from Chapter 11.
Spyglass Entertainment will receive 0.52% of the reorganized company. Two entities owned by Spyglass affiliates — Cypress Entertainment Group Inc. and Garoge Inc. — will receive approximately 4.17% Current equity holders, including Texas Pacific Group, Sony, Comcast and Providence Equity Partners, will see their interests wiped out by the transaction.
It’s the first public announcement from MGM since it disclosed on Sept. 15 that its lenders had agreed to forgive debt payments for the seventh time in a year. New expiration date is Oct. 29 — just one week after the deadline to endorse the plan.
With the attempts to restructure or find a buyer for MGM ongoing for well over a year, pressure had been mounting on the studio to reach some kind of agreement. On Wednesday, according to a source familiar with the matter, the Spyglass toppers met with about 100 debtholders for a detailed presentation on their plans to restructure the company.
It is expected to take about 30 days for MGM to emerge from bankruptcy once debtholders give their approval. At that point, the studio will be debt-free and will quickly begin ramping up film and television production, a source said.
Those familiar with the specifics of the Barber/Birnbaum plan, however, said the studio will put more emphasis on developing scripted and reality programming for cable TV. Under its new structure, MGM would have three execs overseeing film, TV and digital. In part, the concept hinges on developing TV programs from MGM’s 4,000-title library, including “RoboCop,” “Silence of the Lambs” and “Dances With Wolves.”
Approval of the new plan would be good news for several major film projects that have languished while the financial fate of the once-powerful studio remained in limbo. Production on a new James Bond movie had been put on hold pending the outcome of talks. Also, Guillermo del Toro blamed the MGM situation when he decided in May to vacate the director’s chair for the back-to-back “Hobbit” films, which have still not been greenlit. MGM owns half the rights to “The Hobbit” with New Line.
The films’ future had been called into question more recently because of an announced boycott by actors unions due to the refusal of the producers to sign a deal with New Zealand performers. New Line and MGM backed “Hobbit” exec producer Peter Jackson, who said he was considering moving the production from New Zealand unless the issue is quickly resolved.
Real progress toward a resolution of MGM’s fate ramped up last month when Barber and Birnbaum signed a nonbinding letter of intent to take over the troubled studio. The two emerged in the late summer as the leading candidates following discussions with MGM’s largest creditors, which include Anchorage Advisers and Highland Capital.
The storied studio, sold by Kirk Kerkorian in 2005 for $4.8 billion, drew bids earlier this year from Time Warner, Lionsgate and Access Industries, but all came in well below debtholders’ targets.
More recently, a new player — Indian conglom Sahara India Pariwar — was reported to be in exploratory talks about acquiring MGM for more than $2 billion.