MGM looks to avoid bankruptcy

28-May-2009 • Skyfall

Could James Bond's next coup be keeping MGM out of bankruptcy court?

Burdened by a debt load totaling almost $4 billion, MGM execs had been hoping to get enough hit movies into theaters quickly enough to solve its money woes internally. But with growing signs of restlessness among studio creditors, the Lion is on the prowl for any sort of capital restructuring that can avert a forced Chapter 11 bankruptcy reorganization - reports THR.

One big motivator: MGM's long-standing hold on the 007 franchise could come into play in a court-supervised reorganization. To avoid that, MGM's owners might consider giving up a sizable portion of their equity holdings.

MGM is owned by a consortium including Sony, Comcast, TPG Capital and Providence Equity. No one is suggesting that talks between the studio and its creditors have yielded a specific game plan. But some sort of voluntary restructuring could emerge in the absence of any obvious white-knight investor.

One scenario would see a creditors-led restructuring in which the lenders are allowed to swap a sizable portion of MGM debt for studio equity. Current debtholders include Elliott Associates, a New York-based hedge fund closely tied to Hollywood producer Ryan Kavanaugh that's been buying up hundreds of millions in distressed MGM debt.

None of this is to say that Kavanaugh's Relativity Media would come away with rights to Bond -- or even "The Pink Panther" or other core MGM film assets. But if Elliott and Kavanaugh or any other major debtholders are able to convert their holdings into equity, it could provide leverage to secure film-development rights of various lesser properties.

And it would keep MGM -- and 007 -- out from under the gavel of a bankruptcy judge.

JPMorgan is acting as an administrative agent for the 144 Lion creditors and ultimately will have a lot to say in deciding terms of any MGM reorganization. Other parties in the mix include two Los Angeles-based financial advisories: Houlihan Lokey -- hired by an MGM creditors steering committee -- and Moelis & Co., which is helping the studio in its search for capital.