MGM Reorganization Takes Another Hurdle in Bankruptcy Court

Reduction of leased office space in MGM Tower is part of latest plan

A U.S. Bankruptcy Court judge has ruled that some last-minute modifications to its financial-reorganization plan prior to its Nov. 3 court filing have been approved, meaning the plan won’t have to go before lenders for another over vote by lenders.

The bankruptcy reorganization review is expected to take at least another two weeks to complete but eventually will result in Spyglass Entertainment co-toppers Gary Barber and Roger Birnbaum assuming the reins of MGM as co-CEOs of the Century City studio.

The “prepackaged” Chapter 11 bankruptcy plan was approved by more than 100 MGM lenders, who agreed to swap almost $4 billion in debt holdings for a collective 95% stake in MGM. But the final terms contained certain changes demanded by investor Carl Icahn, a big MGM debtholder.

Certain other terms now approved by the court include the removal from the deal of a 15-title film library controlled by Barber and Birmbaum.

Judge Stuart Bernstein also approved a reduction in the company’s leased space in MGM Tower and a more than $4 million break-up fee, to be paid to Spyglass should the plan fail to proceed out of court. The Hollywood Reporter reported exclusively that the company would reduce its office space.

“Once amended, the plan will be deemed accepted by MGM’s creditors,” MGM said in a statement issued Friday. “ Other motions approved were the commitment fee motion, the break-up fee motion, the Ernst &Young LLP retention application, the space reduction motion and final approval of the cash management motion. 

Approval of these motions will help pave the way for MGM to confirm its plan, which received overwhelming approval by its secured lenders on Oct. 29.”

Once approved by the court, the studio restructuring will wipe out MGM ownership positions by Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle.

The reorg plan is set for a Dec. 2 confirmation hearing.