Sahara still committed to finalizing MGM bid

Indian conglomerate could offer up to $2 billion, source says

Sahara India Pariwar remains in the hunt to bag the Lion.

The diversified Indian conglomerate recently surfaced as a potential bidder for MGM, which last year staged an auction to sell the financially troubled studio but was unsuccessful in attracting bids sufficient to please holders of almost $4 billion in Lion debt. Warner Bros. parent Time Warner fielded a top bid of $1.5 billion, which was rejected.

Though initially thought a mere tire-kicker, Sahara is committed to formalizing a bid for MGM of up to $2 billion, a well-placed source said Wednesday.

After the studio's failed auction, MGM management and its consultants at Moelis & Co. turned their sights on securing new management for the studio, aiming also to construct a related bankruptcy-reorganization plan that would turn the Lion's crushing debt load into lender equity. That plan is well now afoot, with Spyglass Entertainment co-toppers Gary Barber and Roger Birnbaum in final negotiations to come aboard as co-chairman and CEOs of MGM.

The plan includes a modest breakup fee of $4.5 million, payable to Spyglass if MGM fails to complete the arrangement. There was always considered a chance that Time Warner or another suitor might come in with a compelling 11th hour offer to buy MGM, and Sahara says it's putting together an offer to do just that.

The Lion's lenders have hired the Houlihan Lokey consultancy to advise on various refinancing options. JP Morgan heads a steering committee of the biggest debtholders.

Lenders-side sources are uncertain how seriously to take Sahara, in part because the Indian company has dealt only with management so far and has had scant contact with the debtholders. But it's clear the lenders would be open to reviewing a bid of $2 billion or more for MGM by Sahara or anyone else.

As for the effect the flurry of activity by Sahara will have on MGM's arrangement with Spyglass, a lenders-group source said, "It remains to be seen."

MGM;s current owners including Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle likely would see their equity positions in the studio wiped out in a restructuring.

The studio is being run by an office of the CEO comprised of turnaround specialist Stephen Cooper, CFO Bedi Singh and film topper Mary Parent. All are expected to exit once a refinancing plan of any sort is finalized.
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