MGM wins fifth extension
Studio gets two-month stretch in $400 million debt collectionMGM said Thursday the cash-strapped studio has won a fifth extension of the deadlines for forking over more than $400 million in debt and interest payments.
Burdened by a crushing $3.7 billion in debt and a credit facility set to expire, the Lion first tried unsuccessfully to find a buyer for the studio and more recently has been searching for new equity investors to assist in a massive restructuring of the Century City studio. The latest debt forbearance gives MGM until July 14 to make payments to a large group of lenders, who are expected to end up with the majority of studio equity following a likely bankruptcy court-facilitated restructuring
The Lion had been under a May 15 debt-payments deadline, following previous extensions of separate deadlines on principal and interest payments.
"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," the studio announced in a brief press statement. "The lenders took this action in support of the company's ongoing efforts to evaluate long-term strategic alternatives to maximize value for its stakeholders. MGM appreciates the continued support of its lender group for the process it is undertaking."
MGM has been using Moelis & Co. as a consultant in its search for financial alternatives. Houlihan Lokey is advising a JP Morgan-led steering committee of Lion debtholders.
The studio and its lenders also have been meeting with industry VIPs such as Peter Chernin, Roger Birnbaum and others for input on its restructuring plans. Eventually, MGM may tap one of those giving advice as a replacement for current CEO Stephen Cooper, a veteran turnaround specialist who will move on once a restructuring is completed.
MGM's owners include Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle. Most, if not all, would lose their positions in any restructuring.
Time Warner topped bidders in a failed MGM auction with a $1.7 billion offer, but the Warner Bros. parent isn't interested in partial ownership. On the other hand, TW could re-engage with the Lion at any point to negotiate a modestly increased bid for the entire studio.
But for now ,companies such as News Corp., Qualia Capital and Lionsgate are in talks regarding more narrowly drawn investments in MGM.