By Devin Zydel on 2009-12-19
NEW YORK (Reuters) – First-round bids for Metro-Goldwyn-Mayer will come in later than initially expected because negotiations over confidentiality agreements have slowed down the sale process, sources familiar with the matter said on Thursday.
MGM, the famed film studio that said in November it was exploring a potential sale, has sent out a sales prospectus to all the parties who signed its non-disclosure agreement, including Time Warner Inc (TWX.N) and Lions Gate Entertainment (LGF.N), the sources said.
But getting potential bidders to sign the NDAs has taken a while because MGM, which is owned by a group of private equity and media companies, wanted to restrict the ability of buyers to talk directly to MGM’s creditors, one of the sources said.
MGM, which is owned by a group including private equity firms Providence Equity Partners and TPG TPG.UL, and media companies Sony Corp (6758.T) and Comcast Corp (CMCSA.O), is struggling with nearly $4 billion in debt.
Its creditors are waiting to see how high bidders value the company. If the initial valuations come in too low, the creditors might decide to keep the company and restructure it, two of the sources said.
MGM has not set a deadline for the first round of bids yet, even though potential bidders had expected to put in offers before Christmas, the sources said.
MGM sent out non-disclosure agreements to about 20 interested parties in November, sources had previously told Reuters.
The companies that received the non-disclosure agreements included News Corp (NWSA.O), which has not signed the document yet, two of the sources said.
MGM, Lions Gate and Time Warner declined comment. News Corp was not immediately available for comment.
Liberty Media Corp (LINTA.O) Chief Executive Greg Maffei said earlier this month that his company would look at the Hollywood studio and library assets of MGM.
Maffei said the company would look at MGM for a possible transaction but added the assets are not a “must-have” for its Liberty Starz unit. He was speaking at a UBS Media investor conference in New York.
MGM, whose film library includes James Bond titles, has been setting up a virtual data room to give bidders access to information, the sources said.
FORBEARANCE EXTENDED
MGM’s lenders have extended a debt forbearance until January 31, which exempts it from interest payments of an undisclosed amount as it tries to develop a long-term business plan.
At the time it announced a possible sale, MGM said its other options included operating as a stand-alone entity or forming strategic partnerships.
The studio faces debt obligations of $3.7 billion stemming from its 2005 buyout, plus payments on a $250 million revolving credit facility due April 2010.
It was purchased from majority owner Kirk Kerkorian for $2.85 billion by a group including private equity firms Providence Equity Partners; TPG; DLJ Merchant Banking Partners, a unit of Credit Suisse (CSGN.VX); and Quadrangle Group; and media companies Sony and Comcast. The group also assumed a debt of $2 billion.
Film financing experts have said MGM had been funding operations largely through library cash flow and access to $500 million in financing set up for its United Artists label, which is partly owned by movie star Tom Cruise.
Stay up-to-date with all the latest James Bond news by visiting CommanderBond.net’s main page and our Discussion Forums.
