‘Hobbit’ money sought as MGM files for bankruptcy
LOS ANGELES, USA (AP) — Hollywood studio Metro-Goldwyn-Mayer Inc, the home of James Bond, filed for bankruptcy protection yesterday in a plan that had the backing of its lenders and put funding of its half of The Hobbit back on track.
The “prepackaged” bankruptcy plan, more than a year in the making, should go quickly. MGM is to restructure and be managed by the co-CEOS of Spyglass Entertainment.
MGM lenders will trade about US$4 billion in debt for stock in the new company, valued at around US$2 billion.
Billionaire investor Carl Icahn was involved in the run-up to the filing, first backing a rival takeover attempt by Lions Gate Entertainment Corp, then throwing his weight behind Spyglass last week.
The company said in a statement that “certain immaterial modifications” convinced Icahn, a holder of a significant amount of MGM debt, to back the plan. Debt holders such as Icahn, Anchorage Advisors and Highland Capital Management are now set to take over the studio and equity owners such as Sony Corp and Comcast Corp. will have their stakes wiped out.
The changes included allowing Icahn to appoint one member of the nine-member board, on which Spyglass’ co-CEOs Gary Barber and Roger Birnbaum would also get one seat each.
The modified deal excludes 15 films from the Spyglass movie library such as Seabiscuit. As a result, the stake of Spyglass’s co-CEOs in MGM will fall from the originally proposed 4.7 per cent to significantly less, said a person familiar with the matter, who was not authorised to speak publicly and requested anonymity. Instead, future projects that Spyglass is developing will be included in the merger, the person said.
“I am pleased that we were able to obtain an agreement to make changes to the MGM prepackaged plan that allows me to support it and enables the company to avoid a potentially costly and disruptive bankruptcy process,” Icahn said in a statement.
In the bankruptcy court filings, MGM sought approval to spend up to US$125 million from its accounts on operations over the next 15 weeks.
MGM plans to retain its US$40 million investment in The Hobbit, the two-part prequel to The Lord of the Rings trilogy, and have a lender cover the remainder of its half of the project in exchange for fees, the filing said.
The Hobbit is being directed by Peter Jackson and is half-owned by Time Warner Inc’s Warner Bros. The two movies, being shot back-to-back, have a budget between US$530 million and US$550 million, and MGM is responsible for half that, the filing said.
