MGM Files Pre-Packaged Bankruptcy3 Nov, 2010 By: Erik Gruenwedel
As expected, debt-laden Metro-Goldwyn-Mayer Inc. Nov. 3 filed a pre-packaged Chapter 11 plan of reorganization in the U.S. Bankruptcy Court for the Southern District of New York.
The famed Los Angeles-based studio said it has enough cash on hand, in addition to consent of senior lenders, to maintain normal business operations through the Chapter 11 process — which it believes will last no longer than 30 days.
MGM, which was bought for $5 billion in 2004 by a consortium led by private equity firms TPG, Providence Equity Partners, Sony Corp. of America and Comcast, among others, has lost hundreds of millions of dollars over the years as its venerable catalog failed to generate projected revenue.
The filing was a formality following the Oct. 29 vote by the studios secured lenders, which hold more than $4 billion in outstanding debt, to enter into a reorganization plan that has Gary Barber and Roger Birnbaum — senior executives with minority stakeholder Spyglass Entertainment — assuming the positions of co-CEO and co-chairman of MGM Holdings Inc.
The bankruptcy also has the approval of activist shareholder Carl Icahn, who previously supported an MGM merger attempt with Lionsgate. The Santa Monica, Calif.-based mini-major is now suing Icahn in regards to that failed effort.
MGM plans to raise about $500 million in financing to fund operations, including a new slate of movies and TV shows, following bankruptcy.
“By sharply reducing MGM’s debt load and providing access to new capital, the proposed plan of reorganization achieves these goals,” said current co-CEO Steve Cooper.