Vote imminent on possible MGM reorg

If approved, Spyglass' Barber, Birnbaum would be co-CEOs

More than 100 MGM lenders will vote during the next two weeks on whether to approve a studio reorganization crowning Spyglass toppers Gary Barber and Roger Birnbaum as the Lion's new keepers.

A detailed proposal by the Spyglass duo for taking over the Century City studio and reshaping its operations was presented Thursday to creditors. Ultimately, the plan will be filed as a "pre¬packaged" Chapter 11 bankruptcy reorganization and turn nearly $4 billion in studio debt to lender equity.

MGM lenders have until Oct. 22 to vote on the plan, with process insiders predicting easy passage. Under its terms, Spyglass and a related subsidiary would get a 4.7% equity sliver, and Barber and Birnbaum would become co-CEOs of MGM once the plan exits bankruptcy court.

The bankruptcy filing is expected by month's end, with the subsequent court process likely to take about 30 days.

MGM's current owners -- including Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle -- would see their hold on the studio wiped out in the proposed reorganization.

Hedge funds Anchorage, Highland, Davidson Kempner and Solis acquired about 35% of MGM's publicly traded debt the past year. Approval of a prepackaged bankruptcy would be needed from 51% of lenders and a group representing two-thirds of the amount owed.

The studio is being run by an office of the CEO comprising turnaround specialist Stephen Cooper, CFO Bedi Singh and film topper Mary Parent. All likely would exit their posts as part of a MGM revamp.

Under terms of its latest debt forbearance, MGM has until Oct. 29 to fork over more than $450 million in debt and interest payments following the April expiration of its revolving credit facility with J.P. Morgan. The matter becomes moot once the Lion enters bankruptcy court.

Typically, even a bankruptcy filing wouldn't preclude the emergence of another offer to buy the studio. But a source close to the process said that is highly unlikely.

Diversified Indian conglomerate Sahara India Pariwar recently said it was working on a bid for MGM of up to $2 billion, but a formal offer hasn't materialized. Time Warner's bid of $1.5 billion topped a failed MGM auction last year.

"We're confident that that plan will be approved by lenders," the source said. "And for all intents and purposes, the auction process is closed and will not be reopened."

Lionsgate's biggest shareholder, Carl Icahn, has accumulated an unspecified amount of MGM debt, and some suggested that could help the mini-major stay in the hunt for a proposed merger with the Lion. But that prospect now also appears dead.
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