The Lion’s jungle soon will get a little greener.
MGM is finalizing a new $1.5 billion credit facility co-managed by J.P. Morgan and Bank of America. That reps a $300 million boost from the studio’s current loan facility, set to expire in September, 2003.
Managers soon will begin signing up additional participants in the facility, which includes two “tranches,” or loan pools. That syndication process commences with a presentation to prospective participants skedded for Thursday, with several lenders already expressing initial interest.
One tranche involves two five-year revolving funds of $600 million each, and the other is a six-year term loan for $300 million. Money will be used for film operations and other corporate purposes.
Studio expects to release 20 MGM and United Artists pics this year. Titles include the 20th installment in Lion’s lucrative James Bond series “Die Another Day,” which unspools Nov. 22.
David Davis, senior veep and entertainment analyst at Houlihan, Lokey, Howard & Zukin in Los Angeles, said Lion’s ability to nail down a new, bigger loan facility is a reflection of lenders’ confidence in the studio.
“It’s a positive statement about current management,” Davis said. “For them to get a 25% increase in their credit facility in a pretty tough financing market is a tip of the hat to MGM.”
Studio execs Thursday acknowledged a loan review was under way, but declined to comment on details of any new arrangements. Bank officials declined comment on the new facility, which is just the latest Lion effort to strengthen its financial footing.
In March, MGM offered 10.5 million discounted new shares to raise $174.1 million for debt reduction, operating capital and possible acquisitions.
The Santa Monica-based studio’s debt totaled almost $850 million at the beginning of this year, and the offering helped cut that to $723 million by March 31. But execs said in an earnings conference call last month that debt would likely return to about $850 million by year’s end.
The offering also helped MGM increase its public float and simultaneously decreased the stake of majority owner Kirk Kerkorian to 77%.
In the offering, institutional investors got a 9% discount from the studio’s share price at the time it was announced. That had an immediate depressive effect on the stock, which has been trading between $15 and $17 ever since.
Lion shares, carrying a 52-week high of $23.08 and a low of $13.86, closed up 6¢ at $16.33 on Thursday.
MGM, which holds its annual shareholders meeting Monday, said April 23 that red ink swelled to $90.9 million in the first quarter from a loss of $17.5 million in the same period of last year. Execs blamed underperforming pics “Hart’s War” and “Rollerball.”