MGM seeks $600 million to make more franchise movies

20-Aug-2008 • Bond News

Metro-Goldwyn-Mayer Inc., the movie studio controlled by private-equity firms, is raising as much as $600 million to produce some of its biggest films including ``The Hobbit'' - reports Bloomberg.

The financing will be completed in about three weeks, Jeff Pryor, a spokesman for Los Angeles-based MGM, said yesterday in an interview. He declined to discuss terms or investors.

MGM's would be the first movie fund completed since Deutsche Bank AG and Viacom Inc.'s Paramount Pictures scrapped plans last month to raise $450 million. The MGM fund includes ``The Hobbit,'' being produced by ``Lord of the Rings'' director Peter Jackson, and ``Pink Panther'' movies starring Steve Martin, Pryor said.

``In the past, movie studios haven't offered Wall Street the opportunity to participate in their biggest and best films,'' Pryor said. ``There is a lot of interest because of the quality of product we have.''

Paramount blamed market conditions for unfavorable terms in scrapping its fund on July 15, and Deutsche Bank subsequently closed its division dedicated to film financing as demand dwindled.

MGM films including ``Charlie Bartlett'' have taken in $46.5 million in U.S. and Canadian theaters this year, trailing behind all of the major studios and down 76 percent from the same period in 2007, according to Box Office Mojo LLC. Time Warner Inc.'s ``The Dark Knight,'' this year's biggest movie, has taken in $471.1 million since its July 18 release.

Paula Wagner resigned last week as chief executive officer of MGM's United Artists label, after releasing one film, ``Lions for Lambs,'' in two years. The movie, starring her production partner, Tom Cruise, cost $35 million to make and made $15 million in domestic ticket sales, according to Internet Movie Database Inc.

Wagner and Cruise, brought in to revive UA in November 2006, raised $500 million in August 2007 to make as many as four films a year. The day of her departure, MGM moved up the release of Cruise's ``Valkyrie'' to Dec. 26 from a planned Feb. 13.

``The Hobbit,'' being directed by Guillermo del Toro, is scheduled for release in December 2011. Jackson's three ``Lord of the Rings'' movies, distributed by New York-based Time Warner, each cost about $95 million to make, according to Imdb.com.

The MGM financing will also be used for next year's ``Fame,'' a remake of the 1980s musical, Pryor said. Investors will have access to future projects that include ``Bond 23,'' the working name of the ``James Bond'' installment that follows the Nov. 7 release ``Quantum of Solace,'' Pryor said. ``Bond 23'' is scheduled for 2010, according to Imdb.com.

MGM Chairman Harry Sloan is trying to rebuild the studio by reviving past successes such as ``Rocky'' and developing new film series after the company was taken private in April 2005 in a $5 billion buyout led by Providence Equity Partners and TPG Inc.'s TPG Capital LP.

Providence, based in Providence, Rhode Island, has a 29 percent stake in MGM, while TPG, based in Fort Worth, Texas, has 21 percent. Sony Corp. and Comcast Corp. each own 20 percent. DLJ Merchant Banking Partners has 7 percent, and Quadrangle Group with 3 percent.