04 February 2010

News Corp. Offers Cash, Debt Assistance to MGM


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, according to a another person with knowledge of the situation. 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 today 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 today 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. The studio 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.

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.

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