Amendment to exclude Spyglass library from merger approved
A federal bankruptcy court has cleared several hurdles for confirmation of MGM’s bankruptcy plan on Dec. 2 — including granting permission to the studio to seek a $500 million loan to ramp up operations.
In a Friday hearing in Manhattan, Judge Stuart Bernstein authorized amendments to MGM’s “pre-packaged” plan of reorganization after finding that the modifications were immaterial.
Those modifications excluded the Spyglass Entertainment library from the deal, thus reducing the stake that Spyglass will have in the revamped MGM from 5% to less than 1%. Spyglass toppers Gary Barber and Roger Birnbaum will become the new heads of MGM once it emerges from Chapter 11 protection.
The fees on the $500 million exit loan will be kept confidential. MGM had said previously that it expected to raise about $500 million in financing to fund operations, including production of a slate of films and TV series.
Bernstein also approved a $4 million breakup fee to be paid to Spyglass if there’s a breach of its agreement with the studio along with MGM’s request to manage its cash in bankruptcy.
Jay Goffman, an attorney for MGM, told Daily Variety that Bernstein’s approval of the motions was required to keep the case on track for a Dec. 2 confirmation.
“Approval of these motions will help pave the way for MGM to confirm its plan,” the studio said in a statement Friday.
The hearing took place nine days after MGM filed for Chapter 11 bankruptcy protection with a pre-packaged plan that it said could move through the court in as few as 30 days. The plan has the support of Carl Icahn, who owns about 18% of the Lion’s debt and will receive authority to appoint one of nine directors on the board.
The Chapter 11 plan will eliminate $5 billion in debt by converting a loan through JPMorgan into the new stock in the reorganized company. The plan wipes out the equity from the $5 billion acquisition of the studio in 2005 by a consortium led by Sony Corp.
Icahn had backed a rival plan last month to merge MGM and Lionsgate, but he agreed last week to MGM management’s plan. Lionsgate vice chair Michael Burns admitted earlier last week that Lionsgate execs were in New York City to meet with MGM execs and discuss a possible MGM-Lionsgate merger.
The studio was put up for sale a year ago but the bids it drew, including a $1.5 billion offer from Time Warner, weren’t high enough to satisfy the creditors. MGM’s assets include the James Bond franchise and a half interest in “The Hobbit” films, its name and logo, the UA operations, a library with more than 4,000 titles and a bare-bones film and TV operation.