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MGM Officially File For Bankruptcy

Wednesday 3rd November…

Blighted Hollywood studio MGM officially file for Bankruptcy in a specialist court in New York with the financial re-organisation plan naming Spyglass Entertainment’s Gary Barber and Roger Birnbaum as co-CEO’s of the new studio.

This prepackaged Chapter 11 bankruptcy plan was approved last week by more than 100 MGM lenders, who agreed to swap $4 billion in debt holdings for a collective 99% stake in the Century City studio. The final terms contain certain changes demanded by investor Carl Icahn, a big MGM debtholder.

Court review of the plan is expected to take 30 days and once approved the studio restructuring will effectively erase any claim to ownership from Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle.

Investor and Debtholder Carl Icahn will end up with a sizable stake once his $400 million-plus in Lion debt is converted to equity. The billionaire investor had also been backing a rival MGM restructuring plan involving a proposed merger of MGM and Lionsgate, in which he also is a major investor with a stake of about 30%. So it’s a win-win situation for Icahn and although that proposal has been tabled for now, some suspect he may push for it later.

Icahn will get a seat on the MGM nine-person board, along with Barber and Birnbaum.

“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,” said MGM chief Steve Cooper,

“By sharply reducing MGM’s debt load and providing access to new capital, the proposed plan of reorganization achieves these goals. Having received approval through our recently completed solicitation process, we are pleased that the lenders support MGM’s approach. We now look forward to quickly emerging from Chapter 11.”

In a joint statement the new C.E.O’s said: “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.”

Icahn, in his almost simultaneous statement said “I am pleased that we were able to obtain an agreement to make changes to the MGM prepackaged plan that allows me to support it and enables the company to avoid a potentially costly and disruptive bankruptcy process”.

4 Comments

4 Comments

  1. Attorney

    Nov 18, 2010 at 8:30 pm

    I have been reading articles about this and have heard discussions on it since their declaration a couple of weeks ago. As I’ve been following this, I’ve been glad to hear that they “look forward to quickly emerging from Chapter 11.” I wish them the best, after all who doesn’t love their movies?

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