MGM creditors ask for delay of Spyglass vote to consider Lionsgate

15-Oct-2010 • Bond News

MGM debt holder Franklin Templeton Investments has sent a letter to the studio's board on behalf of other creditors asking to delay by three weeks a vote scheduled for next Friday to ratify a "prepackaged" bankruptcy plan that calls for the company to be taken over by the management of Spyglass Entertainment, according to two people familiar with the situation - reports the LA Times.

The move would give MGM's approximately 100 debt owners extra time to consider a last-minute merger proposal made by Lions Gate Entertainment on Monday.

A delay in voting on the Spyglass deal would be a strong signal that the Lions Gate offer is being taken seriously by the creditors who are determining MGM's fate. If the Oct. 22 deadline remains in place, the prepackaged bankruptcy plan that would erase the studio's more than $4 billion in debt, give creditors 95% of its equity, and put Spyglass co-chief executives Gary Barber and Roger Birnbaum in charge would remain the most likely course of action in the immediate future.

It's unclear how MGM's board of directors will respond to the letter and whether a majority of creditors also want more time to consider Lions Gate's offer.

One key figure sure to agree with Franklin Templeton is Carl Icahn, who owns 12% of MGM's debt and is the largest shareholder in Lions Gate. He has publicly endorsed the merger proposal.

Representatives for Franklin Templeton and MGM declined to comment.