MGM obtains fifth debt extension, has another two months

14-May-2010 • Bond News

MGM has received two more months sort out its future, obtaining a fifth extension on its debt payments in order to support the studio's ongoing efforts to improve its financial position, reports Variety.

The Lion issued the statement Thursday, a day before the fourth extension was due to expire.

"MGM said today its lenders agreed to extend the forbearance period and therefore will not seek remedies in connection with the nonpayment of interest and principal due on the company's bank debt, including the revolving credit facility, until July 14, 2010," MGM said. "The lenders took this action in support of the Company's ongoing efforts to evaluate long-term strategic alternatives to maximize value for its stakeholders. MGM appreciates the continued support of its lender group for the process it is undertaking."

The announcement didn't address what steps MGM may take next -- whether it will seek another round of bidding or recapitalize itself, probably through a pre-packaged bankruptcy. But with bids having come in far lower than the debtholders hoped, the possibility of a sale has lessened.

MGM ousted Harry Sloan as chairman last August and replaced him with turnaround specialist Stephen Cooper. The studio put itself up for sale in November, drawing a trio of binding offers in mid-March -- with Lionsgate bailing out a week later, and Len Blavatnik's Access Industries dropping out earlier this month, leaving only Time Warner as a possible buyer.

The bids from Time Warner and Access were believed to be far below the $2 billion-plus threshold price sought by MGM and its debtholders. A bankruptcy filing would likely take several months and likely result in laying some of its 400 staffers. MGM agreed last month to have Sony handle the global theatrical distribution for "Zookeeper," which the studios co-produced; and producers Michael G. Wilson and Barbara Broccoli announced several weeks ago that they've put plans on hold for the next James Bond pic due to the "continuing uncertainty" surrounding the future of MGM.

MGM carries debt of $3.7 billion. Its assets include its name and logo, the United Artists operations, a library with more than 4,000 titles, the James Bond franchise, half of "The Hobbit" franchise and a bare-bones film and TV operation.

MGM's lone release this year, "Hot Tub Time Machine," grossed $48 million in seven weeks. Studio's still planning to release a remake of "Red Dawn" in November and 3D pic "Cabin in the Woods" in January.