MGM contacts News Corp, Time Warner, others

Sends confidentiality agreements to 20 interested parties

NEW YORK -- Metro-Goldwyn-Mayer, the famed film studio that is considering selling itself, has sent confidentiality agreements to about 20 interested parties including Time Warner Inc and News Corp, sources familiar with the matter said on Tuesday.

The studio, struggling with nearly $4 billion in debt, has also sent these documents to Lions Gate Entertainment Corp. and Sony Corp, as a prelude to letting interested parties examine its books, the sources said.

Two of the sources said Peter Chernin, the former president of News Corp. who has been advising Comcast Corp. on its proposed NBC Universal joint venture with General Electric, also plans to take a look at MGM. It is unclear if Chernin had been sent a nondisclosure agreement yet.

Chernin is a veteran Hollywood executive who left News Corp. in June when his contract expired. But he struck a production deal with News Corp's 20th Century Fox as part of his severance contract, which requires the studio to buy two films a year for six years.

MGM is considering an auction process, but its creditors would first like to see how likely bidders value the company, two of the sources said. The company is setting up a virtual data room to give bidders access to information.

If initial valuations come in too low, the creditors might decide to stay away from an auction for now, the people said.

MGM, home to a renowned film library including James Bond movies, said on Nov. 13 it was exploring a potential sale of the company as it struggles with looming debt payments and come up with a long-term business plan. It could also form strategic partnerships or operate as a stand-alone entity, the company said.

MGM might not engage in the traditional process of sending out a sales prospectus to each potential bidder, relying instead on the data room and management presentations, two sources said.

The studio, which has enlisted a restructuring specialist to help turn it around, faces debt obligations of $3.7 billion stemming from its 2005 buyout, plus payments on a $250 million revolving credit facility due April 2010.

MGM is owned by a group including private equity firms Providence Equity Partners and TPG, and media firms Sony and Comcast. The group bought MGM for $2.85 billion, and assumed $2 billion in debt as part of the purchase.

MGM, News Corp, Sony and Time Warner declined to comment. Chernin and Lions Gate were not immediately available to comment.
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