MGM debt holders agree to fourth extension

Lenders also postpone April 8 deadline on $250 million due

Despite any grumbling over low bids in the auction for MGM, the studio's more than 100 debtholders have agreed to a fourth extension of a deadline on a big interest payment due by the Lion.

The lenders also agreed to postpone an April 8 deadline on a $250 million payment coming due on debt principal.

In a statement Wednesday, MGM said: "Lenders agreed to extend the forbearance period and therefore will not seek remedies in connection with the nonpayment of interest and principal due on the company's bank debt, including the revolving credit facility, through May 14, 2010.

"The lenders took this action in support of the company's ongoing efforts to strengthen its financial position, and MGM appreciates their continued support throughout the process."

The six-week extension gives owners and debtholders time to decide whether to seek additional bids to buy the studio, or, as is considered more likely, to solicit offers for more narrow equity stakes in the company. The company is burdened by $3.7 billion in debt, and its current credit facility expires April 8.

MGM debtholders approved the latest forbearance agreement in an electronic balloting. A J.P. Morgan-led steering committee will meet Thursday in Los Angeles to discuss next-step options for the lenders.

Two rounds of bidding for MGM failed to hit a $2 billion price target, with Time Warner the top bidder in the most recent round of offers at $1.5 billion. Many expect the lenders to press for a prepackaged bankruptcy reorganization of MGM in the absence of a compelling offer to buy the studio.

A bankruptcy reorganization likely would shift most studio equity from a current consortium to the debtholders. Current MGM owners include Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle.
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