Studio revises reorg plan after talks with Icahn
As it filed for bankruptcy protection, MGM said Wednesday it has enough cash on hand to fund operations including production of a new slate of film and TV series.MGM, hobbled by $4 billion in debt, formally filed its pre-packaged bankruptcy proceedings on Wednesday in U.S. Bankruptcy Court for the Southern District of New York. The Lion hopes to emerge from Chapter 11 in about a month. In the filing the company seeks the court’s confirmation of its pre-packaged plan of reorganization, five days after MGM’s debtholders approved a plan to restructure the studio through a proposal that leaves Spyglass Entertainment toppers Gary Barber and Roger Birnbaum in charge — and gives investor Carl Icahn a major say-so in the revamped Lion. The plan calls for current equity holders to be wiped out and the debtholders to receive nearly all the equity in the new company. “Upon its exit from bankruptcy, MGM expects to raise approximately $500 million in financing to fund operations, including production of a new slate of films and television series,” the studio said Wednesday. “MGM will retain ownership of all of its assets.” Co-CEO Stephen Cooper, a turnaround specialist brought in 15 months ago, said the plan achieves the twin goals of debt reduction and bringing in new operating funds. “For many months, we have been working with our lenders to explore the strategic options available to MGM to improve MGM’s financial position and maximize the company’s value,” Cooper said in a statement. “By sharply reducing MGM’s debt load and providing access to new capital, the proposed plan of reorganization achieves these goals.” MGM said it’s filed “first-day” motions seeking immediate court approval to continue paying its employees, vendors, participants, guilds and licensors in the ordinary course of business during the entire Chapter 11 process. The key development in recent weeks has been the emergence of Icahn as a player in MGM with 18% of the debt. MGM said Wednesday that it’s received Icahn’s support by revising the plan — specifically removing the Spyglass library of films from the deal and reducing the equity in the reorganized company for Barber and Birnbaum from 5% to less than 1%. Barber and Birnbaum will serve as co-CEOs of MGM Holdings Inc.; Barber will be co-chair and Birnbaum will be co-CEO of the primary operating subsidiary. Barber and Birnbaum will also serve as members of the board of directors of MGM Holdings, along with seven lender appointees, including several independent directors. Icahn’s been guaranteed a board seat too, according to a person with knowledge of the situation. Barber and Birnbaum said in a statement: “MGM is emerging from one of the most challenging periods of its storied history. We are honored and inspired at the prospect of leading one of Hollywood’s most iconic studios into its next generation of unforgettable filmmaking, global television production and distribution and aggressively pursuing, developing and exploiting new digital entertainment platforms.” The plan wipes out the equity in the company from the 2005 buyout of MGM from Kirk Kerkorian. Lionsgate and Icahn had joined forces two weeks ago in offering a rival plan that would give debtholders 55% of the combined company in a deal valued at about $1.8 billion in stock and debt. Given that Icahn’s the largest Lionsgate shareholder with 33%, speculation’s likely to emerge that the billionaire takeover artist will continue to push for an MGM-Lionsgate combination. However, those talks would not start until MGM emerges from bankruptcy, according to a source close to the situation. The new MGM will be a debt-free operation that will put much greater emphasis on developing programming — scripted and reality — for cable TV, sources familiar with planning for the Lion said (Daily Variety, Sept. 9).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.