News Corp. said to offer cash, debt help to keep MGM running

Business Week – News Corp. has expressed interest in providing Metro-Goldwyn-Mayer Inc. with cash and assistance in restructuring debt to keep the studio independent, according to a person with knowledge of the situation.

The non-binding offer from News Corp., owner of the Twentieth Century Fox film studio, was outlined in a letter this week, said the person, who declined to be identified because the talks are private. The person wouldn’t disclose other terms.

MGM, maker of the James Bond movies, is evaluating preliminary bids from possible buyers as it struggles with $3.7 billion in debt. News Corp.’s Fox studio distributes DVDs for Los Angeles-based MGM. Chris Petrikin, a Fox spokesman, declined to comment.

The media investment firm Qualia Capital LLC is separately offering MGM $500 million to fund operations as part of a plan that also seeks to convert some debt to equity, another person with knowledge of the situation said yesterday. In return, Qualia would receive an equity stake in MGM, said the person, who wasn’t authorized to speak publicly.

Susie Arons, an MGM spokeswoman, declined to comment.

News Corp., the owner of Fox television, signed a non- disclosure agreement with MGM on Jan. 15, overcoming a monthlong impasse and allowing it to proceed with an offer, according to a person familiar with the decision.

News Corp., based in New York, gained 9 cents to $12.61 yesterday in Nasdaq Stock Market trading. Class A shares of the company, controlled by Chairman and Chief Executive Officer Rupert Murdoch, gained 51 percent last year.

Interest Respite

MGM said yesterday its lenders extended a respite on interest payments covering the debt until March 31 to give the movie studio time to restructure or find a buyer. MGM will spend “several weeks” evaluating preliminary bids.

Lenders agreed in October to let MGM skip interest payments. The studio has since put itself up for sale.

Fame was MGM’s sole theatrical release in 2009, collecting $69.8 million in worldwide ticket sales, according to Box Office Mojo. The movie, a remake of a 1980 film, cost $18 million to produce, according to the Sherman Oaks, California- based researcher. MGM plans three theatrical releases this year, starting with Hot Tub Time Machine on March 26.

MGM, created in 1924, made films including The Wizard of Oz and Ben Hur. The company, owner of a 4,100-film library with titles including Rocky, sold many of its early movies prior to its 2005 buyout by a group led by private equity firms Providence Equity Partners and TPG. It has a co-production deal with Warner Bros. on the planned film The Hobbit.

Time Warner Inc., owner of the Warner Bros. film studio, was among the first-round bidders, a person familiar with the offers said last week.

Lions Gate Entertainment Corp., the independent film studio run from Santa Monica, California, is also involved in the auction.

Time Warner, based in New York, rose 64 cents to $27.45 today in New York Stock Exchange composite trading. The shares gained 40 percent in 2009. Lions Gate fell 2 cents to $5.20 after rising 5.6 percent last year.

Stay up-to-date with all the latest James Bond news by visiting the CommanderBond.net main page and our Discussion Forums.

MGM studio gets extension on interest payments

Business Week – Metro-Goldwyn-Mayer Inc., the struggling Hollywood studio with the roaring lion as its logo, said Friday it can go two months longer without having to pay interest on its debt as it sells itself to the highest bidder.

MGM, wallowing in about $4 billion in debt, said its lenders agreed to forego interest payments through March 31. The current agreement was to expire Sunday.

The studio is in the process of being sold, and several companies submitted nonbinding bids earlier this month.

Interested parties include Time Warner Inc., News Corp., Lions Gate Entertainment Corp., Relativity Media, Elliott Management and Summit Entertainment.

The studio said it has begun the second phase of its bidding process and “is conducting due diligence with select parties who have submitted bids.”

It said the second phase of the process is expected to run for several weeks.

The eventual winner would gain the right to make new James Bond movies, win half of the rights to the next two “Lord of the Rings” movies based on “The Hobbit” and possibly avert bankruptcy for a studio with some 4,000 movie and TV show titles in its library.

In 2005, a consortium of private equity groups including Providence Equity Partners and Texas Pacific Group joined with Sony Corp. and Comcast Corp. to buy MGM for $5 billion, but its value is estimated to be less than half that now.

Keep turning to CommanderBond.net’s main page and our Discussion Forums for all the latest news from the world of James Bond.

MGM buyer sure to seek bankruptcy plan

The Hollywood Reporter – With MGM drawing first-round offers of less than $2 billion, it’s clear that any company buying the studio will demand that the Lion first submit a prepackaged bankruptcy filing.

That will be needed to keep debt and other liabilities from carrying over to a new owner of the studio. With 140 lenders looking for a payout on $3.7 billion in debt, no buyer will want to cover the balance.

“A prepackaged bankruptcy would cleanse the asset,” a lenders-side source said. “That way, it won’t matter if some of the lenders don’t want to go along with the sale.”

In addition to freeing new owners of lingering lender liabilities, a prepackaged bankruptcy likely would wipe clean unwanted obligations with studio vendors and some film producers.

Seven of 12 companies participating in an initial round of financial due diligence have fielded offers for MGM. Fox parent News Corp. got started late in its review of the Lion’s books and is expected to join the bidding eventually.

Time Warner and Lionsgate are considered among the more credible first-round bidders, with the latter placing a $1.5 billion offer. Details of a bid to pair MGM with Warner Bros. under the Time Warner umbrella have yet to come to light.

Bidders weren’t allowed to cherry-pick studio assets in making offers, and that’s also the plan for a second round of bidding set to begin in the next couple of weeks. However, bidders will be allowed to bid only for a certain percentage of the company’s equity.

Lion owners include Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle.

First-round bidders will learn next week if they have been invited to the second round. Those advancing will gain access to more financial data about the studio.

The additional due diligence is expected to take more than a week.

Keep turning to CommanderBond.net’s main page and our Discussion Forums for all the latest news from the world of James Bond.

MGM suitors await second-round invites

The Hollywood Reporter – Seven companies have placed offers to buy MGM so far, with a nonbinding offer expected soon from Fox.

Warner Bros., Lionsgate and Elliott Management — an investor in producer Relativity Media — were among those making first-round offers. Bidders will learn next week if they have made it into a second round of bidding.

All first-round offers, part of a solicitation process launched last month by MGM consultant Moelis & Co., fell short of the $2 billion target for selling the Lion. But with those holding $3.7 billion in MGM debt pressing for a change in ownership, a lesser sum might get the job done.

First-round offers were allowed only on the entire studio. It’s unclear if a la carte bidding on select MGM assets, or on film rights to the James Bond franchise, will be allowed in the next round.

Lionsgate is considered likely to file a second-round bid for the entire company. So far, the mini-major has offered $1.5 billion to buy the studio, though a spokesman declined to confirm the move.

“Let Lionsgate buy MGM and clean it up,” said an exec at a company sitting out the bidding process. “Then, if they get it cheaply, we’ll buy them.”

None of the first-round offers was particularly well detailed, so the debt holders will be anxious to get a better sense of the seriousness of those placing bids.

A recent decline in trading levels on MGM’s public debt might reflect a growing pessimism on the price that Moelis can secure for MGM. Lion owners include Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle.

JPMorgan Chase is leading a steering committee representing the studio’s lenders group, with the committee expected to meet Monday to discuss the situation. The committee will formalize a third debt-forbearance extension, allowing bidding to continue beyond a Jan. 31 deadline on a big interest payment owed by the studio.

Companies reviewing MGM financial data have included Fox, Warner Bros., Lionsgate, Liberty Media, AT&T, Summit Entertainment, Reliance Big Entertainment and Elliott.

Fox got started late in its due diligence and by Wednesday had yet to submit a bid. Summit is seeking more info before deciding whether to bid, and RBE decided against making an offer.

It was unclear whether Liberty or AT&T were in the mix of first-round bidders, but neither has been considered a serious suitor. First-round bidders often include a number of companies drawn by little more than professional curiosity.

Meanwhile, a source close to Relativity topper Ryan Kavanaugh said that company is closely aligned with Elliott in the bidding process, as execs the New York-based hedge fund await an invitation to the next round of financial review and bidding.

An Elliott insider said, “All options are on the table.”

Keep turning to CommanderBond.net’s main page and our Discussion Forums for all the latest news from the world of James Bond.

MGM continues to solicit bids

The Hollywood Repoter – MGM remains solicitous.

The Lion and studio consultant Moelis & Co. continue to solicit offers from companies interested in acquiring all or part of MGM. Almost 150 lenders bearing $3.7 billion in Lion debt are pushing for a sale of the studio, but don’t expect anything of that sort to happen quickly.

At least two bids were received by Sunday. Moelis has signaled bidding will be allowed to continue through the holiday-stretched weekend, despite a Friday deadline on first-round activity.

On Tuesday, representatives of MGM and Moelis will mull a next step in the process.

In an eleventh-hour development Friday, MGM relaxed some terms of its strict nondisclosure rules, which had kept Fox from participating in first-round due diligence. Studio execs refused to sign off on confidentiality agreements required for access to a virtual data room, with some industryites reading into that Fox’s intent to collaborate with a third-party suitor for MGM such as former News Corp. exec Peter Chernin.

With Fox finally signing off on the newly tweaked forms Friday, the Pico Boulevard studio or parent News Corp. is likely to make some sort of bid for the Lion. Ditto Time Warner and Lionsgate, though it remains to be seen whether their nonbinding offers will be for the entire company or simply select MGM assets or limited film rights such as a bid covering the James Bond franchise.

Those examining financial documents in the due diligence phase that preceded actual bidding included representatives of Warner Bros., Lionsgate, AT&T and Summit Entertainment, Reliance Big Entertainment and others. Fox will review MGM’s books this week.

A report in India’s Economic Times newspaper said Amitabh Jhunjhunwala, vice chairman of RBE-affiliated Reliance Capital, met with MGM execs and bankers in L.A. recently. Jhunjhunwala is also on the board of DreamWorks following RBE’s $325 million investment for an equal stake in Steven Spielberg’s studio.

If bids received in the first round prove sufficiently serious, lenders again would have to stretch the Jan. 31 deadline on a big interest payment owed by the studio if the search for buyers were to continue. MGM lenders did that twice previously.

In a statement Friday, MGM said it would proceed to a second phase of the bidding process after reviewing first-round offers. But that assumes additional debt forbearance, and lender-side sources caution that a further extension of the debt deadline would be unlikely if debt holders believe first-round bids were too low.

In any event, the Lion’s $250 million credit facility runs out in April. So MGM’s current owners are furiously searching for ways of protecting their holdings while the clock ticks down on a possible forced bankruptcy.

MGM’s current ownership group includes Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle.

Lion production execs continue to develop several film projects. The studio will release its first theatrical title in six months on March 19, the John Cusack starrer Hot Tub Time Machine.

Stay up-to-date with all the latest James Bond news by visiting CommanderBond.net’s main page and our Discussion Forums.

MGM bids expected all weekend

The Hollywood Repoter – The studio auction that’s not an auction has a bidding deadline that’s not a deadline.

Moelis & Co. is MGM’s consultant on what the studio describes as an attempt to identify companies interested in acquiring part or all of the Century City studio. Executives won’t call the process an auction and insist that no outcome is guaranteed, but nearly 150 lenders bearing $3.7 billion in Lion debt are pushing for a turnover in ownership.

No bids were expected before Friday, the deadline on a first round of nonbinding offers for the studio, and Moelis has signaled that bidding would be allowed to continue through the holiday weekend. When the business week begins Tuesday, studio executives and their consultants will cull through offers received to determine how to proceed.

In the first round, strict nondisclosure rules kept Fox from participating, as studio executives refused to sign off on confidentiality agreements required for access to a virtual data room. Participants in the process include Warner Bros., Lionsgate, AT&T and Summit Entertainment.

Meanwhile, it’s clear that lenders again will have to stretch the Jan. 31 deadline on a $250 million debt payment by the studio.

MGM lenders, led by JPMorgan Chase and advised by Houlihan & Lokey, appear OK with that, provided some number of reasonable first-round bids are received. Nobody expects any offer to top $2 billion, but something well north of $1 billion would be necessary to validate the process.

Debt holders are anxious to see if first-round bids are worth considering or whether a serious overhaul of the bidding process might be required. An even more serious response by disappointed debt holders would see them force the Jan. 31 debt payment, potentially forcing the Lion into bankruptcy court.

Indeed, some in the lenders group fear that MGM CEO Stephen Cooper wants to elicit such lowball bids for the studio that debt holders are forced to allow current owners to fashion a simple debt restructuring rather than relinquish their hold on the Lion.

MGM’s ownership group includes Sony and Comcast as well as Providence Equity, TPG Capital, DLJ Merchant and Quadrangle.

Stay up-to-date with all the latest James Bond news by visiting CommanderBond.net’s main page and our Discussion Forums.

Low bids for MGM cloud fate of studio

Wall Street Journal – First-round bids are due by the end of the week in the auction of debt-laden film studio Metro-Goldwyn-Mayer, and nearly a dozen prominent Hollywood and media names have submitted offers, according to people familiar with the matter.

Among the companies making offers or weighing bids for the storied studio are Time Warner Inc.; Lions Gate Entertainment Corp.; News Corp., owner of The Wall Street Journal; Summit Entertainment; Liberty Media Corp.; CBS Corp.; AT&T Inc. and Indian conglomerate Reliance Industries Ltd., these people said. They said former News Corp. President Peter Chernin and former Yahoo Inc. Chairman and Chief Executive Terry Semel also have expressed interest.

The bids are in the $2 billion range, the people said, far below the $3.7 billion MGM owes its bank lenders. Some could come in below $1.5 billion, they said.

Representatives of the bidders declined to comment or couldn’t be reached. An MGM spokeswoman declined to comment.

The low offers and MGM’s complex capital structure could force the studio to seek protection from its creditors in bankruptcy court, and try to sell itself while in Chapter 11 proceedings, people familiar with the situation said.

MGM said in November it would seek a possible sale as it struggled with looming debt payments. The studio, which has enlisted turnaround specialist Stephen Cooper to help it restructure, faces debts of $3.7 billion stemming from a 2005 buyout and a $250 million revolving credit facility maturing in April.

The auction of MGM has limped along in part due to limited financial and operational disclosures from the studio, people involved in the process said. In particular, the potential bidders are eager to see more detail about the studio’s distribution rights, known as “avails” in Hollywood parlance.

MGM is owned by a group including private-equity firms Providence Equity Partners and TPG Inc. and media companies Sony Corp. and Comcast Corp., which bought it for $2.85 billion and assumed $2 billion in debt as part of the deal.

MGM released just one film last year, a remake of the 1980s musical Fame, which underperformed at the box office. The studio’s most valuable asset is its film library, which includes some 4,000 titles, including the James Bond and Pink Panther franchises. MGM also owns a piece of the two Hobbit films to be produced by Lord of the Rings director Peter Jackson.

MGM’s library generated more than $450 million in cash in 2008, from the sale of licenses for DVDs and TV deals, according to people familiar with the situation. But amid a decline in the home-video market, it now generates roughly $280 million a year in cash, these people said.

MGM faces key deadlines in coming months, including a forbearance agreement with lenders that expires Jan. 31 and a $250 million revolving line of credit that matures in early April. People familiar with the situation said the forbearance agreement should get a routine extension, and that the studio is expected to be restructured or sold before April.

While MGM will likely get many bids, it could still be forced into bankruptcy, said people close to MGM, its lenders, and potential buyers. Its lender group, led by J.P. Morgan Chase & Co., includes some 100 investors, many of them hedge funds.

It could prove difficult to get so many stakeholders to agree to a transaction. But in bankruptcy court, federal law allows companies to force dissident debt holders to go along with a deal so long as a certain number of other creditors agree.

If MGM decides not to pursue a sale, some other options remain on the table for the beleaguered studio, including a proposal from investment fund Qualia Capital, run by Amir Malin and Ken Schapiro, to restructure the company, convert its debt to equity, and infuse it with enough cash to keep it as a going concern and making movies.

Stay up-to-date with all the latest James Bond news by visiting CommanderBond.net’s main page and our Discussion Forums.

MGM likely to draw bids as 15 January deadline looms

The Hollywood Reporter – A week before a Jan. 15 deadline on offers to buy MGM, two things are clear: The Lion will attract some bids, but debt holders will need to OK another extension on scheduled debt payments beyond Jan. 31.

More than a dozen suitors have signed confidentiality agreements and are culling through financial information about the studio in an online “data room” set up by MGM consultant Moelis & Co. Those include other studios such as Warner Bros. and Lionsgate and nontraditional entertainment players including AT&T and hedge fund Elliott Management.

Elliott had to pledge that its interest is unrelated to the firm’s stake in Hollywood producer Relativity Media. Strict confidentiality terms prohibit suitors from sharing data with other companies, a provision prompting Fox to refuse to participate in the MGM due diligence.

Fox may have hoped to partner on a bid with former News Corp. exec Peter Chernin, who’s been thought to hold some interest in the proceedings. Chernin was a consultant to Comcast in its recently announced deal with GE for a controlling stake in NBC Universal.

Comcast is a current MGM stakeholder, along with Sony, Providence Equity and TPG Capital. Providence holds a 29% stake and TPG 21%, while Comcast and Sony each has a 20% interest following the group’s $5 billion MGM purchase in 2005. DLJ Merchant has 7% and Quadrangle has 3%.

Few in Hollywood believe bids for the studio will exceed $2 billion this time around. MGM remains in active development with a series of films—including the next James Bond pic—and has three films set for theatrical release this year.

Almost 150 companies share in MGM’s $3.7 billion in debt. A third debt forbearance approval is likely in the next couple of weeks.

“The debt will have to be extended, and they will have to extend the forbearance,” a lenders-group source said. “There isn’t time to get anything done by Jan. 31 at this point.”

Since October, MGM chief Stephen Cooper has asked for a series of extensions on the studio’s next big debt payments. Lenders agreed to the debt forbearance in exchange for an agreement to seek offers of interest from companies willing to buy the studio in whole or in part.

Stay up-to-date with all the latest James Bond news by visiting CommanderBond.net’s main page and our Discussion Forums.

MGM bids expected soon

Variety – The possible sale of MGM—one of Hollywood’s longest-running dramas—will come into focus in the next few weeks when the first bids are expected to be submitted.

The Lion, which put itself up for sale Nov. 13, has received several non-disclosure agreements back from potential bidders, a source close to the process indicated. It sent out over 20 NDAs last month out as a prelude to bidders seeing MGM’s internal books.

It’s not a given that MGM will be sold. The beleaguered studio has left open the door to continue operating as a standalone entity or forming some kind of strategic partnership if MGM’s 140 debtholders agree to do so, possibly through a prepackaged bankruptcy. The bondholders have agreed to hold off receiving interest payments until Jan. 31 in order to enable management to find out the actual value of the assets and whether it should proceed with a formal auction.

And in a sign underlining the uncertainty facing MGM, studio chief Mary Parent has retained powerful attorney David Boies, according to a rep for his firm Boies Schiller & Flexner. The rep refused to elaborate Monday and Parent—hired in March 2008 as chairman of the worldwide motion picture group—wasn’t available for comment.

MGM has released only one movie this year—a revamp of Fame that cumed just $22 million domestically—and has slotted Hot Tub Time Machine, The Zookeeper and Red Dawn next year and Cabin in the Woods in 2011. It’s a co-financer with Warner Bros. on the two Hobbit films, expected to begin production this summer in New Zealand with Guillermo Del Toro directing.

MGM’s assets—a 4,000-title library, the logo, the United Artists operations, rights to the James Bond and Pink Panther franchises and half-ownership in the upcoming Hobbit films—are expected to fetch somewhere between $1.5 billion and $2 billion. Speculation has focused mostly on Time Warner Inc. as a likely bidder, since it has over than $9 billion in cash from the recent spinoff of its cable systems and would regain full control over The Hobbit. Time Warner also owns the pre-1985 MGM library through its 1996 buyout of Turner Broadcasting and made an eleventh-hour bid in 2004 for MGM but was topped by an investor group led by Sony.

News Corp., Lionsgate and Liberty Media have also emerged as possible bidders although it’s been reported recently that News Corp. may not bid due to concerns over restrictions in the non-disclosure agreement. Reps for Time Warner, News Corp. and Lionsgate have refused to comment.

MGM carries a debt load of $3.7 billion from the Sony buyout along with payments due next April on its $250 million revolving credit facility. Harry Sloan was replaced as MGM’s CEO in August summer by turnaround specialist Stephen Cooper.

MGM was taken private in 2005 by a consortium led by Sony, Providence Equity Partners, Texas Pacific Group and Comcast Corp. The group paid $2.85 billion and assumed $2 billion in debt as part of the purchase.

Stay up-to-date with all the latest James Bond news by visiting CommanderBond.net’s main page and our Discussion Forums.

MGM: We won't sell to just anybody

Wall Street Journal – Who says beggars can’t be choosers?

Metro-Goldwyn-Mayer Inc., the storied Hollywood studio, burdened by a crippling debt load of nearly $4 billion, put itself up for sale last month. But MGM is deliberately slowing the process, according to people familiar with the matter, by restricting potential bidders to a small pool of serious buyers.

In hopes of soliciting a serious offer before widening the circle, the company is forcing interested parties to sign highly restrictive non-disclosure agreements that include non-compete clauses as well as rules that disqualify companies that need a financial partner to make a play for the studio.

Limiting who can look at the company’s books offers some practical advantages for MGM: competitors won’t be able to get an inside peek at the company’s operations.

While non-disclosure agreements were sent out to roughly two dozen parties, only a handful have signed and returned them, according to sources. Those include conglomerates large enough to buy the whole company without taking on a financial partner, such as Time Warner Inc. Time Warner declined to comment. News Corp., however, reportedly is at an impasse over a possible bid because of the strict non-disclosure agreements according to a person familiar with the matter. News Corp. publishes The Wall Street Journal.

MGM’s valuable film library, which includes more than 4,000 titles and the iconic James Bond and Pink Panther franchises, is the company’s most valuable asset. The studio also owns a piece of the two upcoming Hobbit films produced by Lord of the Rings director Peter Jackson, which are expected to become major blockbusters.

MGM expects to receive its first round of offers in mid-January. The company’s creditors are hoping for a bid of at least $2 billion, according to the people familiar with the matter. If no buyers come through, the company could alter the non-disclosure agreements and widen the pool of potential buyers. The creditors could also choose to keep the company and restructure it, likely under a pre-packaged bankruptcy process.

Once at the vanguard of Hollywood, MGM now finds itself with little room to maneuver. In August, the studio’s owners—led by Providence Equity Partners, TPG, Comcast Corp. and Sony Corp.—replaced Chief Executive Harry Sloan with turnaround expert Stephen Cooper. And it only released one film this year: a remake of a 1980s musical film, Fame, which underperformed at the box office.

MGM had brought in top-tier talent to jumpstart its movie studio in 2008—including Mary Parent, a star executive who joined MGM as chairman of its world-wide motion picture group after a long stint running production at Universal Pictures. But the nature of the film industry means that new team’s slate of pictures is just beginning to hit theatrical release now and won’t immediately generate cash.

If the company seeks bankruptcy protection, that could trigger the dissolution of several big contracts. Some executives at the studio are seeking advice on how to insulate themselves from possible fallout.

A spokeswoman for Boies Schiller & Flexner said that Ms. Parent had retained Hollywood power attorney David Boies. Ms. Parent declined to comment.

In November, MGM reached an agreement with its lenders to forgo interest payments on its massive $3.7 million debt until the end of January, in hopes of biding time to develop a long-term plan. The company also faces payments on a $250 million revolving credit facility, which comes due in April of next year.

Stay up-to-date with all the latest James Bond news by visiting CommanderBond.net’s main page and our Discussion Forums.