Ailing studio MGM facing bankruptcy next month

Tue Aug 10, 2010 2:33am EDT
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By Carl DiOrio

LOS ANGELES (Hollywood Reporter) - Things are going so badly with MGM's restructuring review that a forced bankruptcy is a real possibility by September 15.

Then again, lenders don't want to lose control of the studio's lucrative James Bond movie rights. So one of them could still dig deeper to provide enough new equity capital to make a voluntary restructuring feasible. Or if that option fails, the Century City studio could obtain a seventh extension of its debt forbearance agreement with its 100-plus lenders.

In any case, little more than a month before $400 million-plus in owed debt and interest payments come due, this much is certain: Frustration has never been higher with the more than yearlong effort to heal the ailing Lion.

"It's kind of become a joke," said an executive at one of the companies considering a strategic partnership with MGM. "There is a real fatigue among the lenders after all of the forbearance agreements."

The studio has secured six forbearance agreements, or delays of the deadline for paying principal and interest on its senior bank debt. Strapped by almost $4 billion in total corporate debt, MGM repeatedly has gotten lenders to postpone recoupment of a $250 million revolving credit facility and $200 million or so in related interest payments.

Certainly, the array of possibilities have grown no more appetizing since the Lion fired MGM CEO Harry Sloan a year ago after the failure of a lengthy search for studio financing. Its more-concerted search for restructuring options kicked in the following November, when it formally retained the Moelis & Co. consultancy.

A forced bankruptcy reorganization -- like any prepackaged deal -- would shift MGM ownership from a current consortium to studio debtholders. But it also likely would spell the end of MGM's role as a film producer or distributor.

Several major film projects already have been stalled by the studio's financial ill-health, including the next James Bond picture and two films based on J.R.R. Tolkien's book "The Hobbit." Other projects treading water include a planned "Three Stooges" movie and a "Robocop" remake.   Continued...