MGM Closes $500 Million Revolving Credit Facility to Retire Debt, Expand Film and TV Projects

Issue 53 - The Business: MGM Tower
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The reorganization plan for MGM has been filed in a New York court.

The deal was announced Monday by co-CEO's Gary Barber and Roger Birnbaum.

Officially ending it's bankruptcy, the new management at Metro-Goldwyn-Mayer has closed a $500 million revolving credit facility, it was announced Monday by co-CEO’s and co-chairmen Gary Barber and Roger Birnbaum.

“A year ago MGM was in bankruptcy and to receive this oversubscribed facility just one year later is proof positive that through careful and efficient business decisions, we have earned the faith of the financial community,” said Barber and Birnbaum in a statement.

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The credit facility will be used to retire debt and to develop the film and TV businesses. That will include films being made under a partnership with Sony Pictures Entertainment, including 21 Jump Steet, the next James Bond movie Skyfall; The Hobbit: An Unexpected Journey and The Hobbit: There and Back Again (in partnership with Warrner Bros.) and GI Joe: Retaliation (with Paramount Pictures).

Other movies in development include remakes of Robocop, Carrie, Poltergiest and Teen Wolf, along with Punk Farm and Vikings.

The new credit facility is in place of a term loan and smaller revolving credit that MGM received when it went through a pre-packaged bankruptcy that involved the exchange of more than $4 billion in debt for equity valued at about $2 billion. At the time the bankruptcy closed in early December, Barber and Birnbaum officially took charge.

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The restructuring of MGM was a long process that began in May 2009 when Moelis & Co., an investment bank was hired to advice management. In August 2009 CEO Harry Sloan was replaced by Stephen Cooper, who was billed as a turnaround expert.
At the time MGM was having problems meeting $300 million in annual interest payments. Moelis had to work out the bankruptcy with more than 140 creditors. The closing of the deal Monday will trigger a payment of over $9 million to Moelis.  
The new loan was led by JP Morgan Chase, which reportedly put up $75 million of the new credit facility. The rest came from Deutsche Bank, Bank of America Merrill Lynch, Royal Bank of Canada, SunTrust Bank, Wells Fargo, CIT Bank, Union Bank, City National Bank and OneWest Bank.

“The success of this financing further validates investor confidence in the management team and their ability to execute on its business strategy. Market demand was significantly greater than the $500MM issuance, which is a clear indication that the bank market continues to strengthen for the entertainment sector,” said John Miller, Vice Chairman, JPMorgan Chase.

“Co-leadership in this highly attractive financing is Deutsche Bank’s endorsement and continuing support of an exceptionally strong management team led by two true industry experts, Gary and Roger, and the supportive leadership of an exceptional Board. The over-performance in the past year allowed for this improved financing,” said Brian Mulligan, Vice Chairman, Deutsche Bank.