MGM Eyes $3.7 Billion Debt Refinancing-source
LOS ANGELES, May 14 (Reuters) – Hollywood studio Metro-Goldwyn-Mayer said it hired investment bank Moelis & Co to help refinance $3.7 billion debt and is talking with a steering committee of 140 creditors as part of the process.
The storied MGM, home to the James Bond movie franchise, said it had discussed its annual financial results with lenders on Thursday, adding that they were in line with its budget and that the company was in compliance with all loan covenants.
A source familiar with the matter said MGM finished the year with over $500 million in cash flow from its film and TV library operations, down about 5 percent from a year ago.
In a statement, MGM said “it was exploring options for optimizing its capital structure and has begun talks with a steering committee of its lenders as part of the process.”
MGM reiterated its commitment to staying independent.
The creditors of MGM, which has various movies in the pipeline from Fame to Zookeeper, have formed a steering committee led by JPMorgan Chase & Co (JPM.N), according to another source familiar with the matter.
MGM is owned by a consortium of companies, including private equity firms TPG Capital LP [TPG.UL] and Providence Equity Partners, Sony Corp (6758.T) and Comcast Corp (CMCSA.O), which paid about $5 billion in debt and equity in September 2004 to buy the then-publicly traded studio from its majority owner, billionaire Kirk Kerkorian.
Merger specialists have said MGM could be worth $2 billion to $2.5 billion, but it has repeatedly said it is not for sale.
Rumors of its potential sale surface from time to time and were recently rekindled with unconfirmed reports that billionaire financier Carl Icahn was buying MGM debt, which sparked speculation he may push for a combination of MGM with Lions Gate Entertainment (LGF.N), another studio Icahn has sought influence over.
Sale rumors also surfaced last summer with the departure of producer Paula Wagner from MGM’s United Artists studio in August.
Bankers estimate MGM is paying north of $250 million a year in interest on the debt, which comes due in 2012.
The sources said MGM was potentially seeking a way to make the loan due later, or reduce it in size.
The studio also hired Goldman Sachs in August and said it was exploring “enhancements” to its long-term capital structure.
Wagner, who is a movie producing partner with actor Tom Cruise, was chief executive of UA, but left to produce movies again. UA, in which Cruise and Wagner both have stakes, last year secured $500 million in financing through Merrill Lynch to fund 15 to 18 movies over the next five years. (Reporting by Sue Zeidler, editing by Gerald E. McCormick, Bernard Orr)
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