Metro-Goldwyn-Mayer Inc, distributor of the James Bond and Rocky movies, filed for bankruptcy in Manhattan federal court after rejecting a takeover bid by Lions Gate Entertainment Corp and billionaire Carl Icahn. The Los Angeles-based studio, which foundered after piling on debt to go private, filed a Chapter 11 petition today in US Bankruptcy Court. It has creditor support for a so-called pre- packaged plan to extinguish about $4 billion of debt and install managers from Spyglass Entertainment Group Inc, the producers of “The Sixth Sense.” Like Tribune Co and the former Chrysler LLC, 86-year-old MGM foundered after a leveraged buyout.
MGM said its plan may be confirmed by the court within 30 days. After the bankruptcy, it aims to raise $500 million for operations, including for new movies and television series, it said.
“By sharply reducing MGM’s debt load and providing access to new capital, the proposed plan of reorganization achieves these goals” of improving the company’s prospects, said Co-Chief Executive Officer Stephen Cooper, who led Enron Corp through its bankruptcy. MGM said in its statement that creditors “overwhelmingly” backed the Spyglass plan, which would swap their debt for most of the stock in a streamlined studio.
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. In a competing bid, Lions Gate, based in Vancouver, offered about $1.7 billion in stock and debt to MGM creditors. To win more MGM creditors, Icahn, offered 53 cents on the dollar for senior MGM loans, or about 18 per cent more than the 45 cents the debt fetched in the market before Lions Gate’s bid.