MGM files for bankruptcy


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MGM studio files for bankruptcy, Icahn backs plan

By Jonathan Stempel – 6 mins ago

NEW YORK (Reuters) – Metro-Goldwyn-Mayer Studios Inc filed for bankruptcy on Wednesday, under a plan that would put one of Hollywood's most storied film studios under the control of its lenders.

The Chapter 11 filing follows a vote by MGM creditors last week to endorse a "prepackaged" bankruptcy that would put MGM under the control of Hollywood executives Gary Barber and Roger Birnbaum, who control the Spyglass Entertainment film company.

MGM also agreed to concessions to Carl Icahn, one of its largest debtholders, to win the billionaire's support for its restructuring.

Icahn had previously supported a rival bid to merge MGM with another studio, Lions Gate Entertainment Corp.

Founded in 1924 and known for its roaring lion logo, MGM controls the James Bond franchise, and has also produced or released many of Hollywood's best-known films, including "The Wizard of Oz" and "Ben-Hur."

Its reorganization would allow secured lenders including Credit Suisse Group AG and JPMorgan Chase & Co to swap more than $4 billion of MGM debt for most of the equity in a reorganized company.

CUTTING DEBT, RAISING CAPITAL

MGM has struggled with too much debt since 2005 when it was sold in a $2.85 billion leveraged buyout.

The buyout group included private equity firms Providence Equity Partners, TPG Capital LP, Quadrangle Group and DLJ Merchant Banking Partners, as well as Comcast Corp and Sony Corp..

MGM said it expects a federal bankruptcy judge to approve the restructuring in about 30 days.

The Los Angeles-based company and roughly 160 affiliates sought protection from creditors with the U.S. bankruptcy court in Manhattan. Judge Stuart Bernstein was assigned to the case.

Stephen Cooper, MGM's co-chief executive, in a statement said the reorganization will improve MGM's finances by "sharply reducing" debt and providing access to new capital.

MGM said it expects to raise $500 million upon emerging from bankruptcy to fund operations, including the production of films and TV series.

ICAHN

Icahn said the plan calls for MGM to adopt a series of corporate governance changes, and give him the right to appoint a board director once the company emerges from bankruptcy.

MGM also agreed not to acquire the film library of Cypress Entertainment, a Barber and Birnbaum affiliate, he said.

"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," Icahn said in a statement.

Barber and Birnbaum would also sit on the board of a reorganized MGM, along with seven directors named by lenders and several independent directors, MGM said.

Lions Gate has separately been suing Icahn, alleging that he interfered with its efforts to merge with MGM.

A Lions Gate spokesman did not immediately return a call seeking comment. Lions Gate has produced the hit TV show "Mad Men" as well as the Oscar-winning film "Precious."

Spyglass' involvement with MGM had also been seen as key to a lucrative arrangement with Time Warner Inc's Warner Bros Pictures and the director Peter Jackson to film two movies based on J.R.R. Tolkien's novel "The Hobbit."

The case is In re: Metro-Goldwyn-Mayer Studios Inc, U.S. Bankruptcy Court, Southern District of New York, No. 10-15774.

(Reporting by Jonathan Stempel, editing by Gerald E. McCormick, Dave Zimmerman)

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If a business is in trouble but has a few key assets, it's better to wait for them to file bankrupcy and offer the administrators money for those assets and let the rest of it burn to the ground. At least that is the case here in Australia, seems this is almost a restructuring more so than an official white flag.

That Icahn is a slimey operator. He tried to buy Marvel back in the early nighties. There's a good book about the whole thing, called Comic Wars.

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