Lion gets go-ahead to use cash to fund prod'n
MGM is on target to emerge from bankruptcy in 30 days.
At a hearing Thursday in federal bankruptcy court in Manhattan, Judge Stuart Bernstein set Dec. 2 as the date for MGM to seek final approval of its reorganization plan.
Attorney Jay Goffman, who is handling the case for MGM, told Daily Variety after the hearing, “We expect to confirm on Dec. 2. All of our first-day motions were granted today.”
MGM was also granted interim permission by Bernstein to use cash collateral of lenders as it reorganizes so that it can pay employees and continue operating during the bankruptcy.
The hearing took place a day 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 debt and who will receive authority to appoint one of the nine directors on the new board.
“It is a fully consensual pre-pack,” Goffman said Thursday.
Goffman said in court that the Chapter 11 plan will eliminate $5 billion in debt by converting a loan through J.P. Morgan 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.
The proposal leaves Spyglass Entertainment toppers Gary Barber and Roger Birnbaum in charge once MGM emerges from bankruptcy with a holding of less than 1% in the new MGM. The studio said Wednesday that it expects to raise approximately $500 million in financing to fund operations, including production of a new slate of films and television series.
Three weeks ago, Icahn had backed a rival plan to merge MGM and Lionsgate, but he agreed this week to back MGM management’s plan.
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 United Artists operations, a library with more than 4,000 titles and a bare-bones film and TV operation.