MGM lenders to meet this week
30-Mar-2010 • Bond News
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A brief additional extension of the Lion's debt forbearance is possible, if only to allow a bit of decorum as a plan is concocted to shift studio ownership from a current consortium to the debtholders. Further bidding for the entire studio is unlikely, but a handful of investors likely will be asked to make offers on narrow equity stakes as a means of raising operating capital.
Wednesday is the deadline on a $200 million-plus interest payment by MGM, whose credit facility expires April 8, forcing an additional $250 million payment to lenders. To get past those two deadlines, something like a 15-day extension of the most recent debt-forbearance agreement is envisioned.
MGM and its consultant Moelis & Co. have asked for a 45-day extension, but lenders seem in no mood to comply.
"The lenders are frustrated and disappointed with the bidding process," a lenders-side source said. "They are also frustrated by the existing restructuring proposals, which amount only to pledges to do better."
But though attempts to sell the studio outright seem to have hit a brick wall, an eventual restructuring of the Lion appears inevitable. Companies keen to assist in the process are expected to meet with Moelis reps and MGM chief Stephen Cooper in an effort to detail investment proposals key to any restructuring.
Access Industries, Qualia Capital and Anchorage Advisors are among those willing to invest $500 million-$1 billion in MGM to obtain a chunk of studio equity, and News Corp. has signaled a possible interest. A key talking point among the parties: their vision for the future mix and scope of operations at MGM, which somehow must re-capitalize movie production if its large-but-overexploited film library is to grow in value.
It's also possible the studio will allow offers for narrowly defined assets, such as the James Bond film franchise or rights to "The Hobbit." Sony is interested in the 007 rights, while Warner Bros. would be willing to buy out MGM's share of "Hobbit," which Warners controls 50-50 with the Lion.
Meeting in Los Angeles, a J.P. Morgan-led lenders committee will discuss ways to restructure MGM, with the aim of making a recommendation to the entire lenders group. The debtholders would have about a week to vote, with two-thirds majority needed to approve any plan.
Once approved, a restructuring plan would be filed in U.S. Bankruptcy Court. A judge would be asked formally to approve a dramatic debt reduction and to wipe away other outstanding liabilities.
Moelis tried unsuccessfully in two rounds of bidding to secure offers of $2 billion or more for MGM from other companies such as Warners parent Time Warner, Lionsgate and others. The auction was forced by the Lion's crushing $3.7 billion debt load and the looming interest and principal payments.
Current MGM owners include Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle.
Separately today, Disney will conclude an auction of its Miramax specialty film division.
The Burbank studio also reaped underwhelming offers in a round of bidding set to conclude March 15, until Disney extended the process to month's end. The studio is running the Miramax auction itself, seeking $700 million for the unit's 700-title library, but so far it has attracted offers spanning a considerably lower range.
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