Studio's future should become clearer soon
MGM’s long-murky future will come into focus this week, as a federal bankruptcy court is set to confirm its bankruptcy plan.
The Thursday, Dec. 2, hearing in Manhattan before Judge Stuart Bernstein will take place less than a month after MGM’s filing 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 deadline for court filings of any objections to the plan was Friday. And a required meeting of creditors — where they can question MGM reps — has been set to take place Tuesday in Manhattan, two days before the court hearing.
“Attendance by the creditors at the meeting is welcomed but not required,” MGM said in a court filing. “At the meeting, the creditors may examine the debtors and transact such other business as may properly come before the meeting.” In a Nov. 12 hearing,Bernstein authorized amendments to MGM’s plan including the exclusion of 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 heads of MGM once it emerges from Chapter 11 protection.
At the hearing, Bernstein also granted permission to the studio to seek a $500 million loan to ramp up operations.
The Chapter 11 plan will eliminate $5 billion in debt by converting a loan through J.P. Morgan into 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.
Lionsgate and Carl Icahn may play major roles in MGM’s future. Lionsgate vice chair Michael Burns acknowledged two weeks ago that Lionsgate execs were in New York City to meet with MGM execs to discuss a possible MGM-Lionsgate merger.
As for Icahn, he owns about 18% of the MGM debt and will receive authority to appoint one of the nine directors on the board. And despite his ongoing battle for control of Lionsgate, the billionaire takeover artist has expressed support for combining MGM and Lionsgate.
MGM’s assets include the James Bond franchise and a half interest in “The Hobbit” films, its name and logo, the United Artists operations, a library with more than 4,000 titles and a bare-bones film and TV operation.
“The Hobbit” is expected to start shooting in February in New Zealand.
On Nov. 23, MGM disclosed in a court filing the composition of its board, including three members who were part of the creditors committee — Patrick H. Daugherty of Highland Capital Management, Christopher Pucillo of Solus Alternative Asset Management and Kevin Ulrich of Anchorage Capital Group.
MGM also tapped MySpace co-president Jason O. Hirschhorn and former CBS chief financial officer Frederic G. Reynolds as directors along with Barber and Birnbaum.