MGM: Multiple offers received to buy studio

Signs suggest that none approach the $2 billion price target

Get ready for a grittier sequel.

MGM confirmed Monday that multiple offers have been received to buy the Century City studio, but signs suggest strongly that none approached the $2 billion price target. So the Lion's more than 100 debt holders are almost certain to press for a bankruptcy reorganization of the studio.

That would shift most equity from the current ownership group to the lenders. But it's likely that new equity capital also will be sought, which probably would mean a new round of solicitations.

Lionsgate and Access Industries had placed bids for MGM by Monday. It was less clear whether Time Warner had bid, but an offer was expected.

"MGM has received a number of bids as part of its ongoing process of exploring strategic alternatives, which include continuing to operate as a standalone entity and evaluating a potential sale of the company," the studio said. "The company will review the bids and related transaction terms over the next several weeks."

MGM has a $200 million-plus interest payment due March 31 and a $250 million principal payment April 8, when its credit facility with JPMorgan expires. Theoretically, lenders could provide more time on the payments, but an extension is anything but certain following three previous forbearance agreements. The studio indicated Monday that it planned to seek such extensions "to strengthen its financial position and to facilitate the company's strategic review process."

In any event, a JP Morgan-led lenders steering committee will meet soon to determine a course of action. The next step likely would be to discuss with the most recent group of MGM bidders whether they would be interested in making offers for more narrowly defined investments in the studio.

Others also might be allowed to join in bidding on equity stakes in MGM. Qualia Capital and News Corp. sat out the most recent round of bidding but have signaled interest in participating in a simpler restructuring of the Lion, whose rights to the James Bond film franchise are widely coveted.

Qualia's Amir Malin wants to provide $500 million or more toward a debt restructuring at MGM. Ditto Access chief Len Blavatnik, who collaborated with MGM chief and turnaround vet Stephen Cooper on a restructuring of Access' energy company, LyondellBasell.

The Lion's current ownership group includes Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle. Most would be unlikely to throw good money after bad and simply take their lumps in a restructuring, but Sony could dig deeper to maintain some hold on the 007 franchise.

Two-thirds of the individual companies in the current group of MGM debt holders would have to agree to any reorganization of the studio.
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