MGM wins sixth debt extension, payments on hold until September

14-Jul-2010 • Bond News

MGM has won a sixth extension of the deadline for making big debt and interest payments to more than 100 increasingly restless lenders, reports THR.

The Century City studio announced Wednesday that its debtholders had agreed to give the Lion until Sept. 15 to make the debt payments, extending a previous forbearance pact set to expire Thursday, June14. Strapped with almost $4 billion in debt, the Lion is stalking the ways and means of shaping a corporate restructuring that can sort out its fiscal affairs while setting the studio's future course.

Such a move likely would turn much of the debt into lender equity, but MGM also hopes to tap new sources of capital. The debt extension pushes off a $250 million principal payment and more than $200 million in owed interest while the studio management and current owners continue to work on details of any restructuring plan.

Of its latest forbearance agreement, 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 throughout this process."

MGM owners include Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle.

A lenders steering committee has been working with management in consulting a host of Hollywood execs on various restructuring options. But after having to give a sixth debt extension, many in the broader lenders group are wondering when an actual plan will emerge.

Meetings with prospective restructuring partners continued through Tuesday, when Lionsgate reps discussed a proposal with an MGM contingent.

Summit Entertainment, Spyglass and others also continue to circle the situation with their own ideas about how to patch up the ailing Lion. Prior to the restructuring talks, MGM had solicited bids for buying the company outright, but a top bid by Warner Bros. was deemed too low at $1.5 billion.