MGM Studios replace CEO Harry Sloan
Struggling Hollywood studio Metro-Goldwyn-Mayer Inc. is turning to a restructuring expert who has helped businesses from energy to doughnuts to help it dig out from billions in debt.
The studio said Tuesday it hired Stephen Cooper, the former CEO of such ailing businesses as Krispy Kreme Doughnuts Inc. and Enron Corp., to join an “Office of the CEO,” which replaces Chief Executive Harry Sloan.
Cooper, named vice chairman, joins Mary Parent, the chair of MGM’s worldwide motion picture group, and Chief Financial Officer Bedi Singh in the CEO office and has as his main task “to lead MGM’s efforts to evaluate alternatives to improve its balance sheet,” the studio said.
Sloan will continue as chairman.
The announcement comes as the studio faces the payback of $3.7 billion in debt by 2012, with payments due starting in mid-2011, and a $250 million revolving line of credit that matures in April.
The debt was amassed when the studio was taken private for nearly $5 billion in 2005 by a group led by Providence Equity Partners, Texas Pacific Group, Sony Corp. and Comcast Corp., DLJ Merchant Banking Partners and Quadrangle Group.
MGM told its lenders in May it was in compliance with its debt agreements as of March 31, but that it had hired financial adviser Moelis & Co. to help it restructure.
The studio has made about $500 million a year in revenue from its library of 4,000 movies and TV shows including a range of James Bond classics, but declining DVD sales have cut that by about 5 percent this year.
It also abandoned talks last year to continue selling its movies to CBS Corp.’s Showtime pay TV channel and instead took a 28.6 percent stake in Epix, a fledgling pay channel to be launched in October with Lions Gate Entertainment Corp. and Viacom Inc.’s Paramount Pictures.
Epix has so far struck just one deal with a distributor, Verizon Communications Inc.’s FiOS network, which has 2.5 million customers.
The last movie MGM released in theaters was Valkyrie, starring Tom Cruise, in December. It plans a handful of new releases in the coming months, including Fame next month and The Cabin In The Woods in February.
Sloan began his tenure at MGM in October 2005 and agreed last August to continue as CEO through October 2011, but was an apparent casualty of the collapse of the credit markets and an industrywide decline in home video revenue.
The studio has had a number of disappointments since its rebirth under private owners.
It brought in actor Cruise and producing partner Paula Wagner to head subsidiary United Artists, but their first movie, Lions for Lambs, flopped and was estimated to have lost $30 million. Wagner has since left the label to pursue projects independently.
Turning to an outside executive without special experience in the entertainment business is a sign the studio’s financial problems are quite severe.
Cooper had replaced Krispy Kreme’s CEO Scott Livengood in 2005 and helped the company sort out an accounting mess while reining in its overexpansion. Previous to that he spent three years at the helm of Enron a month after it filed for Chapter 11 bankruptcy. His firm claimed it earned Enron’s creditors extra billions by holding off on selling assets immediately and shaving professional fees.
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