Carl Icahn Raises Offer to Buy MGM Debt
Carl Icahn says he's ready to hand out more green stuff to soak up MGM's red ink.
The billionaire financier on Tuesday upped his offer to buy all outstanding Lion debt to 53 cents on the dollar. That represents an 8-cent premium above the debt's current trading value and a similar rise from Icahn's offer last week.
MGM owes more than 100 debtholders almost $4 billion and has been seeking approval from the creditors of a company-proposed financial reorganization plan. The "prepackaged" bankruptcy plan would turn outstanding debt into lender equity and hand operating reins of the studio to Spyglass Entertainment co-toppers Gary Barber and Roger Birnbaum, with the Westwood-based production company getting an equity stake of less than 5% in the process.
But Icahn is backing a rival proposal by Lionsgate. That proposal would merge the film and TV minimajor and MGM to give the former a 45% stake in the new entity, Lion lenders a 55% interest and keep $400 million in debt on the corporate books.
Lionsgate's biggest shareholder, Icahn already has accumulated more than $400 million in MGM debt. He seeks more in an effort to force through Lionsgate's merger proposal.
MGM lenders have until Friday to vote to approve or reject the Spyglass-proposed MGM reorg. An MGM source said there is little chance of a second extension of the voting deadline; the first deadline had been set for last Friday.
A J.P. Morgan-led steering committee of the largest MGM debtholders appears to remain solidly in Spyglass' corner. The biggest MGM creditors such as Anchorage Advisors and Highland Capital acquired their debt holdings at even higher trading values than reflected in Icahn's latest offer.
But elsewhere, smaller creditors might be tempted by the tender offer.
"The 53 cents makes it more interesting," a well-placed source said. "I don't think it will get any of the big guys to bite. But I think some people will, if only out of sheer exhaustion."
MGM has been seeking ways of restructuring its finances for more than a year. Icahn said debtholders representing at least $1.6 billion in MGM debt must accept the tender offer by Friday for it to be implemented.
MGMs current owners -- including Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle -- would see their equity positions in the studio wiped out in virtually any MGM restructuring.