MGM to request sixth debt extension

Lenders holding nearly $4 bil in Lion debt expected to give OK

MGM soon will request a sixth postponement of its big debt and interest payments as the Century City studio seeks to restructure its finances and possibly tap a new CEO.

Lenders holding nearly $4 billion in Lion debt are expected to agree to the extension, though nothing is guaranteed and a full-press effort continues to finalize a restructuring proposal sought by the lenders. The studio formally will request the latest extension about a week before the July 15 deadline on a $250 million principal payment and $200 million-plus in owed interest.

That could buy MGM at least several additional weeks to flesh out financial details of its corporate restructuring. But a proposed business plan, likely involving a corporate partnership with another film company, would help sell yet another extension of the debt forbearance to a frustrated group of more than 100 lenders.

Meanwhile, speculation continues about whether the studio will sell off its share of rights to "The Hobbit" to co-production partner Warner Bros., whose New Line is overseeing project development with director Peter Jackson; shooting is set to begin in January. MGM executives would like to hold onto its share of the "Hobbit" rights as long as possible, but some lenders are lobbying for a sell-off to raise funds.

MGM is being run by an office of the CEO, with restructuring specialist Stephen Cooper, film chief Mary Parent and CFO Bedi Singh collaborating as co-CEOs. The studio's management and debtholders have been consulting with possible restructuring partners including Spyglass, Lionsgate and Summit, whose execs ultimately could be tapped to run the Lion.

Key to any restructuring will be an infusion of new capital, and the search for that by the studio and its prospective restructuring partners continues. But it's possible that MGM will crown a restructuring partner and simply hope that and a new business plan for MGM will prompt bankers to fork over enough capital to run the studio for the next few years.

MGM owners Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle could lose their equity positions in any restructuring, which likely would involve a prepackaged bankruptcy filing.

Before its restructuring talks, MGM held an auction that drew a handful of underwhelming offers to buy the studio outright. Warners placed a top bid of $1.5 billion that was deemed too low by lenders but remains on offer.
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