MGM Files Chapter 11

MGM Studios, which was last bought out by private equity firms in 2005, has filed for Chapter 11 bankruptcy. MGM, which has been struggling since its buyout, hired Stephen Cooper, the CEO who had run post-bankruptcy Enron and Krispy Kreme, to restructure the company in 2009. But when nobody offered to buy MGM for enough money–the studio wanted $2 billion–MGM filed bankruptcy instead. From Reuters:

The Chapter 11 filing follows a vote by MGM creditors last week to endorse a “prepackaged” bankruptcy that would put MGM under the control of Hollywood executives Gary Barber and Roger Birnbaum, who control the Spyglass Entertainment film company.

MGM also agreed to concessions to Carl Icahn, one of its largest debtholders, to win the billionaire’s support for its restructuring. Icahn had previously supported a rival bid to merge MGM with another studio, Lions Gate Entertainment Corp.

Lions Gate has separately been suing Icahn, alleging that he interfered with its efforts to merge with MGM. A Lions Gate spokesman did not immediately return a call seeking comment. Lions Gate has produced the hit TV show “Mad Men” as well as the Oscar-winning film “Precious.”

Spyglass’ involvement with MGM had also been seen as key to a lucrative arrangement with Time Warner Inc’s Warner Bros Pictures and the director Peter Jackson to film two movies based on J.R.R. Tolkien’s novel “The Hobbit.”

BusinessWeek has more about who loses as a result of the MGM bankruptcy:

Losers in the bankruptcy may include the 2005 buyout group, which retains most of MGM’s existing stock. Tokyo-based Sony Corp. has a 14 percent stake; the Texas-based private equity firm TPG Capital, run by David Bonderman, has 23 percent; Providence Equity Partners Inc. has 34 percent; Comcast Corp. has 21 percent, and Credit Suisse Group AG affiliate DLJ Merchant Banking Partners, has 8 percent, according to a court filing.

MGM’s largest unsecured creditors are NBC Universal Inc., with $34.6 million owed; Showtime Networks Inc., with a $25.5 million claim, and Rainbow Media Holdings, with $22.9 million, according to a court filing. They also may get little in the reorganization; most of MGM’s stock in the new company will go to secured lenders, MGM said today.

notes the winners:

The studio’s creditors, including Credit Suisse Group (CS) and JPMorgan Chase (JPM), will swap billions of dollars in secured debt for equity in the refashioned MGM. Icahn, who had recently been snapping up MGM debt as part of his takeover plans, will have the ability to appoint a director to the MGM board once it emerges from bankruptcy

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Written by Drea Knufken

Drea Knufken

Currently, I create and execute content- and PR strategies for clients, including thought leadership and messaging. I also ghostwrite and produce press releases, white papers, case studies and other collateral.