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Icahn Offers to Buy $1.6 Billion of MGM Debt

26 Oct, 2010 By: Erik Gruenwedel

Activist investor Carl Icahn Oct. 26 ratcheted up the ante for Metro-Goldwyn-Mayer, submitting a $1.6 billion tender offer for secured debt held by the venerable film studio’s senior lenders.

The offer, which amounts to 53 cents per $1 of principal debt, is separate from Icahn’s offer last week to assume upwards of $963 million in MGM debt provided shareholders — by the voting deadline Oct. 29 — reject a pre-packaged bankruptcy deal proposed by minority stakeholder Spyglass Entertainment.

MGM, which is owned by a consortium of investors, including Sony Pictures, is struggling under about $4 billion in debt.

Icahn, together with Lionsgate, is working to persuade MGM shareholders regarding the merits of a merger between the two studios.

Indeed, Lionsgate CEO Jon Feltheimer, in a regulatory filing, disclosed cost savings of about $100 million through a merger, including the elimination of 176 positions, or 17% of the combined studios’ workforces.

Icahn has a separate tender offer of $7.50 per share to Lionsgate common shareholders to assume majority control of the Santa Monica, Calif.-based mini-major.

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