Spyglass-MGM plan reaches critical step for approval

18-Aug-2010 • Bond News

A plan by Spyglass Entertainment to take over management of Metro-Goldwyn-Mayer has taken a major step forward and is now being considered by all of the struggling studio's lenders - reports the LA Times.

Spyglass chiefs Gary Barber and Roger Birnbaum first began discussions with a handful of MGM's top debt owners several months ago.

But this week Spyglass and the MGM leading debtors subcommittee hammered out all the details of a mutually agreeable plan, according to two people familiar with the situation. On Wednesday, those leading debt owners, which include Anchorage Advisors and Highland Capital, presented the Spyglass plan to MGM's more than 100 debt owners on a conference call, in hopes that they will endorse it.

The proposal calls for Barber and Birnbaum to take over a significantly slimmed down MGM following a pre-packaged bankruptcy. The studio would produce several movies per year, including a "James Bond" movie and two planned pictures based on "The Hobbit," and outsource theatrical distribution to one of the six major studios per year.

In exchange, Barber and Birnbaum would get an ownership stake of 4% to 5% in the new MGM. About 15 movie titles owned by Barber and Birnbaum, such as "The Sixth Sense" and "Seabiscuit," would be folded into MGM's catalog of 4,000 movies. Spyglass would remain a separate company producing its own films.

The full group of debt owners must now consider the Spyglass plan and conduct due diligence. It remains to be seen whether it will approve the proposal or request changes. If the group can't reach a final agreement with Barber and Birnbaum, Lions Gate Entertainment is believed to remain eager to move in with its rival merger proposal.

Time Warner also has a $1.5-billion acquisition offer on the table for MGM, though several top debt owners believe that values the company at too low a price.

A Spyglass executive could not be reached for comment.