Spyglass deal approved by MGM lenders, Ichan offered late deal
MGM lenders have approved, by a comfortable margin, a financial reorganization of MGM led by Spyglass Entertainment, a source told Hollywood Reporter
An official statement with details of the vote was expected by Friday evening.
Under the plan that the lenders have approved -- and which now must be filed in U.S. Bankruptcy Court as a Chapter 11 reorganization -- Spyglass Entertainment co-toppers Gary Barber and Roger Birnbaum are in line to become co-CEOs of the Century City studio.
The more than 100 MGM lenders voted to give the Westwood-based production company operating control of the studio.
However, in an eleventh hour deal pushed by MGM debt-hold Carl Icahn, terms no longer call for Spyglass to get a four percent stake in the studio and more than a dozen Spyglass library titles were removed from the transaction.
Icahn was also promised a seat on the MGM board.
MGM was due to pay more than $450 million in long-delayed debt payments Friday. But the debt payments become moot once the studio files for Chapter 11 bankruptcy reorganization, as stipulated in the Spyglass plan.
The MGM-Spyglass reorganization plan likely will be filed in U.S. Bankruptcy Court in Los Angeles on Monday.
Lionsgate â with key backing from Icahn â had proposed an alternate plan to merge the film and TV company with MGM. With the Spyglass proposal approved by debt-holders, the only question now is whether the oft-combative and ever-resilient Icahn will continue to press for a Lionsgate merger in coming weeks or even months.
Icahn agreed to vote for the Spyglass plan after winning the concessions, but he still favors an eventual MGM-Lionsgate merger, a well-placed source said.
MGMâs current owners -- including Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle -- will see their equity positions in the studio wiped out once the bankruptcy process is completed.
For more than a year, MGM has been grappling with ways to reduce or eliminate almost $4 billion in debt. Icahn has acquired notes on at least $400 million of the MGM debt and has offered to buy up more from other creditors.
Eventually, his debt holdings will convert to a large minority stake in the studio in the bankruptcy process. But itâs unclear if that can translate into corporate clout, as MGM is privately held.
The bankruptcy courtâs review of the âprepackagedâ MGM-Spyglass reorganization plan is expected to take 30-60 days. Assuming Barber and Birnbaum get their mandate, the studioâs first two priorities will be to firm up a 50% interest in the upcoming production of a two-part movie based on J.R.R. Tolkienâs book âThe Hobbitâ and to restart development of the next James Bond film.
The Spyglass duo also must choose a distribution partner for those and other MGM pics, as they plan to shut down distribution operations at the Lion. Some suggest that Paramount -- as a regular collaborator on Spyglass productions over the years -- is a front-runner for the distribution rights, but others believe MGM will award distribution rights picture by picture, with co-production partner Warner Bros. in line to distribute âHobbitâ pics in any event.
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