Won't you just be a good boy and die? MGM seeks yet another extension
Film studio Metro-Goldwyn-Mayer Inc. is in talks with creditors to get further leniency on its debt payments as the two sides continue negotiations about a restructuring plan, said people familiar with the matter - reports the Wall Street Journal
MGM, buckling under a nearly $4 billion debt load, wants lenders to grant a waiver on debt payments until at least the end of June and perhaps longer, these people said, adding that details havenât been hammered out. MGMâs current waiver expires at the end of next week.
The waiver requestâMGMâs fifth since Novemberâcomes as the studio remains locked in negotiations over a restructuring plan that would hand control of the company to creditors.
MGM declined to comment.
MGM has focused its negotiations on a small group of hedge funds invested in the studioâs bank debt. These talks have become important because an auction earlier this year failed to yield bids that would placate the creditors.
Creditors had held out for better offers as the studioâs bank debt traded around 60 cents on the dollar, which implied a value of around $2.4 billion. In the past month or so, the debt has plunged and now trades around 42 cents on the dollar.
The creditorsâ committee, led by J.P. Morgan Chase & Co. and hedge funds Anchorage Advisors and Highland Capital Management, is negotiating a plan to take control of MGM through a debt-for-equity swap, the people said. The plan would be implemented through a âprepackagedâ bankruptcy, lining up many creditorsâ approval prior to an actual filing.
Those creditors have sought advice from other media executives on how to restructure the studio and potentially to manage the restructured company.
Those they have met with include: former News Corp. executive Peter Chernin, former Viacom Inc. executive Jonathan Dolgen, Spyglass Entertainment executives, Revolution Studios founder Joe Roth, Qualia Capital managing partner Amir Malin and Liberty Media Corp.âs Overture Films CEO Chris McGurk, they said.
Some of those media executives couldnât immediately be reached. Arnold Robinson, a spokesperson for Mr. Roth, however, said that the executive âis very, very happy with what heâs doing right now.â A spokesman for Mr. Chernin confirmed that a meeting with MGM and Mr. Chernin took place at the request of one of the creditors, but he added that running MGM is not something Mr. Chernin is actively pursuing. Two people close to Mr. McGurk, who helped turn around MGM once before as vice-chairman and chief operating officer, said he isnât interested in returning.
Some of these executives have proposed to help finance MGM, one of these people said. But creditors want to tap their own money to finance the studio, rather than dilute their holdings, this person said.
Before pursuing a standalone plan, creditors had been hoping to fetch at least $2 billion for the studio in a sale. Time Warner Inc. made a bid for about $1.5 billion, people familiar with the matter said, and the offer remains on the table as the studio negotiates with creditors. Time Warner Chief Executive Jeff Bewkes said Wednesday that Time Warner doesnât need MGM but a deal âcould make senseâ at the right price.
Len Blavatnikâs Access Industries has dropped out of the bidding process, said a person familiar with the situation, and doesnât appear inclined to provide any capital to the studio. Access declined to comment.
MGMâs woes trace back to debt taken during a buyout that handed control to private-equity firms Providence Equity Partners, TPG, and media companies Sony Corp. and Comcast Corp.
The studio released only one new film last year, and a recent release, Hot Tub Time Machine, had a soft landing at the box office. The family controlling MGMâs James Bond franchise recently shelved production of the next film.
Turnaround specialist Stephen Cooper, brought in by MGMâs owners as part of a broad management shakeup in November, told lenders last month that the studio needed an additional $1 billion to finance six to eight new movies. It is unclear whether creditors are willing to support that level of investment, and some discussions have centered on giving MGM just $500 million.
The people familiar with the deal said that creditors havenât decided whether to leave some debt on the studio or to entirely clear the studioâs balance sheet. One person said creditors could aim to leave a little less than $1 billion in debt on MGMâs books.
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