Bids for MGM, Miramax underwhelm

Lion reorganization looms; Disney extends deadline

Two studio auctions had set deadlines for bids for the past weekend, but the situations drew more yawns than offers.

MGM may have managed to wrangle one or more bids from the latest round of its Moelis-led process to sell the Century City studio but has given stragglers until Monday to file additional offers. None are likely to hit a $2 billion price target amid broad disappointment about the results of financial due diligence, so the prospect of a bankruptcy reorganization of the Lion grows stronger by the day.

Time Warner has been considered the leading suitor for MGM, with Lionsgate also still in the running. The latter minimajor prepared a bid of less than $1.5 billion in its latest offer; it's unclear what -- or even if -- Time Warner will bid for MGM.

Separately, Disney -- which has tagged its Miramax assets for sale -- saved face by stretching the deadline for making offers on the 700-title catalog until March 31.

Meanwhile, the absence of aggressive bidding for the two studios surprised few.

Burdened by a debt of $3.7 million, MGM boasts a 4,000-title movie library, but the catalog has been highly exploited and little refreshed in recent years. Miramax -- for which Disney seeks $700 million or so -- has been shuttered for months, and is unlikely to be resurrected as an active studio.

Recent trading in MGM debt suggests an enterprise value of about $2.4 billion. But a first round of non-binding bidding also failed to fetch a single offer approaching $2 billion.

MGM has a big interest payment due on March 31 and a $250 million principal payment April 8, when its credit facility with J.P. Morgan expires. Unless its more than 100 lenders agree to a fourth extension of the interest payments and a similar postponement on the principal, bankruptcy is the only recourse.

Equity will shift from a current ownership consortium to the lenders, who may consider accepting new equity partners as a means of tapping new capital. Qualia Capital and Access Industries are interested in doing just that, but it's unclear whether film production would continue after a restructuring.

Qualia's Amir Malin wants to pump upward of $500 million into a restructured MGM. But Access' Len Blavatnik may have a leg up on competitors, as he previously helped MGM chief and turnaround vet Stephen Cooper restructure Access energy company LyondellBasell.

The Lion's current ownership group includes Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle.

JP Morgan Chase is leading a steering committee representing the studio's lenders group.
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