MGM likely to draw bids as deadline looms

07-Jan-2010 • Bond News

A week before a Jan. 15 deadline on offers to buy MGM, two things are clear: The Lion will attract some bids, but debt holders will need to OK another extension on scheduled debt payments beyond Jan. 31, notes the Hollywood Reporter.

More than a dozen suitors have signed confidentiality agreements and are culling through financial information about the studio in an online "data room" set up by MGM consultant Moelis & Co. Those include other studios such as Warner Bros. and Lionsgate and nontraditional entertainment players including AT&T and hedge fund Elliott Management.

Elliott had to pledge that its interest is unrelated to the firm's stake in Hollywood producer Relativity Media. Strict confidentiality terms prohibit suitors from sharing data with other companies, a provision prompting Fox to refuse to participate in the MGM due diligence.

Fox may have hoped to partner on a bid with former News Corp. exec Peter Chernin, who's been thought to hold some interest in the proceedings. Chernin was a consultant to Comcast in its recently announced deal with GE for a controlling stake in NBC Universal.

Comcast is a current MGM stakeholder, along with Sony, Providence Equity and TPG Capital. Providence holds a 29% stake and TPG 21%, while Comcast and Sony each has a 20% interest following the group's $5 billion MGM purchase in 2005. DLJ Merchant has 7% and Quadrangle has 3%.

Few in Hollywood believe bids for the studio will exceed $2 billion this time around. MGM remains in active development with a series of films -- including the next James Bond pic -- and has three films set for theatrical release this year.

Almost 150 companies share in MGM's $3.7 billion in debt. A third debt forbearance approval is likely in the next couple of weeks.

"The debt will have to be extended, and they will have to extend the forbearance," a lenders-group source said. "There isn't time to get anything done by Jan. 31 at this point."

Since October, MGM chief Stephen Cooper has asked for a series of extensions on the studio's next big debt payments. Lenders agreed to the debt forbearance in exchange for an agreement to seek offers of interest from companies willing to buy the studio in whole or in part.