Lenders Approve MGM-Spyglass Reorganization Plan

3:54 PM PDT 10/29/2010 by Carl DiOrio

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Spyglass Entertainment’s Gary Barber and Roger Birnbaum in line to become co-CEOs of the Century City studio under plan to be filed in U.S. Bankruptcy Court.

UPDATED 1:04 p.m. Sunday, Oct. 31, 2010

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MGM is poised to file in U.S. Bankruptcy Court a "prepackaged" bankruptcy reorganization plan that hands studio operating reins to Spyglass Entertainment co-toppers Gary Barber and Roger Birnbaum.

More than 100 studio lenders on Friday approved the financial reorganization plan "overwhelmingly," MGM said.

"MGM will now move expeditiously to implement that plan, which will dramatically reduce its debt load and put the company in a strong position to execute its business strategy," the privately held Century City studio said. "MGM is appreciative of the lenders' support."

In the plan -- which the court will review in Chapter 11 bankruptcy proceedings -- Barber and Birnbaum are named as co-CEOs of MGM, with creditors dropping claims on almost $4 billion in studio debt in exchange for a collective ownership stake in MGM of more than 95%. But eleventh-hour negotiating with MGM debtholder Carl Icahn has put in jeopardy a 4.7% stake in the studio that Spyglass would have gotten under the plans original terms.

It's now unclear what interest Spyglass will get, and there were conflicting claims from anonymous sources during the weekend about whether more than a dozen Spyglass library titles had been removed from the deal terms. Terms of the MGM-Spyglass plan were tweaked on the insistence of Icahn, who sought two board seats for his cooperation and was given one, an MGM insider said.

Film-and-TV minimajor Lionsgate – with key backing from Icahn -- had proposed an alternate MGM restructuring. Lionsgate proposed merging MGM and Lionsgate, giving studio lenders a 55% equity stake in the combined operation and Lionsgate a 45% interest.

With the Spyglass proposal approved by debtholders, there's just the lingering question of how strenuously the oft-combative and ever-resilient Icahn will continue to press for a Lionsgate merger in coming weeks. Icahn is Lionsgate's biggest shareholder, and sources at the minimajor suggest he will continue to battle for an eventual merger of MGM and Lionsgate.