MGM continues to solicit bids, at least two confirmed

17-Jan-2010 • Bond News

MGM remains solicitous, says the Hollywood Reporter.

The Lion and studio consultant Moelis & Co. continue to solicit offers from companies interested in acquiring all or part of MGM. Almost 150 lenders bearing $3.7 billion in Lion debt are pushing for a sale of the studio, but don't expect anything of that sort to happen quickly.

At least two bids were received by Sunday. Moelis has signaled bidding will be allowed to continue through the holiday-stretched weekend, despite a Friday deadline on first-round activity.

On Tuesday, representatives of MGM and Moelis will mull a next step in the process.

In an eleventh-hour development Friday, MGM relaxed some terms of its strict nondisclosure rules, which had kept Fox from participating in first-round due diligence. Studio execs refused to sign off on confidentiality agreements required for access to a virtual data room, with some industryites reading into that Fox's intent to collaborate with a third-party suitor for MGM such as former News Corp. exec Peter Chernin.

With Fox finally signing off on the newly tweaked forms Friday, the Pico Boulevard studio or parent News Corp. is likely to make some sort of bid for the Lion. Ditto Time Warner and Lionsgate, though it remains to be seen whether their nonbinding offers will be for the entire company or simply select MGM assets or limited film rights such as a bid covering the James Bond franchise.

Those examining financial documents in the due diligence phase that preceded actual bidding included representatives of Warner Bros., Lionsgate, AT&T and Summit Entertainment, Reliance Big Entertainment and others. Fox will review MGM's books this week.

A report in India's Economic Times newspaper said Amitabh Jhunjhunwala, vice chairman of RBE-affiliated Reliance Capital, met with MGM execs and bankers in L.A. recently. Jhunjhunwala is also on the board of DreamWorks following RBE's $325 million investment for an equal stake in Steven Spielberg's studio.

If bids received in the first round prove sufficiently serious, lenders again would have to stretch the Jan. 31 deadline on a big interest payment owed by the studio if the search for buyers were to continue. MGM lenders did that twice previously.

In a statement Friday, MGM said it would proceed to a second phase of the bidding process after reviewing first-round offers. But that assumes additional debt forbearance, and lender-side sources caution that a further extension of the debt deadline would be unlikely if debt holders believe first-round bids were too low.

In any event, the Lion's $250 million credit facility runs out in April. So MGM's current owners are furiously searching for ways of protecting their holdings while the clock ticks down on a possible forced bankruptcy.

MGM's current ownership group includes Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle.

Lion production execs continue to develop several film projects. The studio will release its first theatrical title in six months on March 19, the John Cusack starrer "Hot Tub Time Machine."