The Wall Street Journal
Metro-Goldwyn-Mayer Inc. filed for bankruptcy-protection Wednesday, cementing a long fall for the iconic Hollywood studio with the roaring-lion logo.
MGM filed a "prepackaged" Chapter 11 bankruptcy in New York that has approval from nearly all its creditors. Creditors last week approved a plan to forgive more than $4 billion in debt for ownership stakes in the restructured studio and turn over management to Spyglass Entertainment co-founders Gary Barber and Roger Birnbaum.
MGM said it anticipates a bankruptcy judge approving its restructuring in about a month, paving the way for a quick trip through bankruptcy court. The studio plans to raise about $500 million upon exiting bankruptcy to fund new films and television shows along with other operations.
Stephen Cooper, a turnaround specialist and co-founder of Zolfo Cooper, will continue to lead MGM during its bankruptcy-court restructuring, the studio said.
MGM had hoped to seek bankruptcy-protection over the weekend but delayed its filing to negotiate with dissident creditor Carl Icahn. Mr. Icahn had offered to buy out other MGM creditors at a premium to upend the vote on the Spyglass restructuring plan but failed to get enough support to block the deal.
Mr. Icahn has been pushing MGM's creditors—led by J.P. Morgan Chase & Co. and hedge funds Anchorage Advisors and Highland Capital Management—to merge with Lions Gate Entertainment Corp., a rival studio that the activist investor has been trying to take over all year as its largest shareholder.
To get its reorganization plan approved by a bankruptcy judge, MGM needed creditors holding roughly two-thirds of the studio's $4 billion debt load and more than half of individual debt holders to vote for the deal. In the end, Mr. Icahn remained among the only holdouts, the people said.
Mr. Icahn said today he would support MGM's restructuring plan after the studio altered certain parts of the deal.
Mr. Icahn will get a board seat once MGM exits bankruptcy. Messrs. Barber and Birnbaum will no longer be chairmen of MGM's new board at the holding company level. And older Spyglass films, including "Seabiscuit" and "The Sixth Sense," will no longer be merged with MGM's film library.
Spyglass, the small production company behind recent films such as the latest incarnation of "Star Trek" and "Get Him to the Greek," had planned to merge its older films for a little more than a 4% equity stake in the studio. But Mr. Icahn protested that the films were overvalued.
In addition, MGM's new shareholders will have the ability to call special meetings under certain circumstances.
Mr. Icahn said the changes enabled MGM to "avoid a potentially costly and disruptive bankruptcy process." MGM called the changes "immaterial" and said they would be filed with the bankruptcy court for approval.
As part of the restructuring plan, the Spyglass founders should still get a sliver of equity in the restructured studio in exchange for other assets. They also have a management-incentive plan that allows them to increase their ownership stakes should MGM's performance rebound.
MGM's largest creditors have agreed informally to continue discussing a possible merger with Lions Gate. But they stopped short of inserting language in the studio's restructuring plan that would require "good faith negotiations."
MGM struggled amid debt taken on in a 2005 leveraged buyout. The studio tried to sell itself in fall 2009 and the early parts of this year but failed to garner offers suitable to creditors. MGM then shifted to pursuing a standalone restructuring through a streamlined bankruptcy process.
MGM was advised by top law firm Skadden, Arps, Slate, Meagher & Flom and investment bank Moelis & Co. Investment bank Houlihan Lokey advised MGM's creditors.