MGM says it's not on block

'Capital enhancement' to include production fund

MGM said Monday that it's not for sale but acknowledged retaining Goldman Sachs to pursue capital "enhancements."

Those include a new production fund that's expected to be announced "soon," MGM spokesman Jeff Pryor said.

Pryor declined to specify lenders on the financing or a deal amount. But sources familiar with the pending transaction said that the Royal Bank of Scotland will lead a more than $500 million financing that features a $340 million revolving credit facility and which should be buttoned up in three to six weeks.

Longer term, Goldman Sachs' strategic search could yield a new private-equity investment in the studio, a debt restructuring or even an initial pubic offering, Pryor said.

"Contrary to recent media reports, (MGM) is not for sale," the Lion said in a statement cleared by all current owners of the studio.

"There is no 'asking price' for the company," the studio said. "MGM's existing financing arrangements are sufficient to meet its needs. Goldman Sachs has been retained to explore enhancements to MGM's long-term capital structure."

Business Week reported Friday that the Wall Street firm had approached prospective MGM buyers with an asking price of $5.2 billion. The Hollywood Reporter reported Wednesday that Mumbai-based Reliance Big Entertainment had considered taking an equity stake in the studio but decided against such a move.

As for MGM's current financing arrangements, the studio has a pair of revolving credit facilities through JPMorgan totaling $450 million, and it has a $500 million production fund for its United Artists division through Merrill Lynch.

MGM recently greenlighted its first production under recently appointed film czar Mary Parent, the horror film "Cabin in the Woods." No production start date has been set as yet, largely because of uncertainty over the prospect of a SAG strike.

The Lion has been on the hunt for additional funding for newly commenced production operations at the parent studio, and executives also have been seeking means of reducing an enormous $3.7 billion debt load at the company.

"All of the MGM shareholders -- including Providence Equity Partners, TPG, Sony Corp. of America and Comcast Corp. -- are pleased with the company's current momentum and are committed to the future growth of the studio," MGM said.

The ownership consortium paid $5 billion to acquire MGM in 2004. A consortium desire to alleviate MGM's debt structure prompted the consortium to retain Goldman Sachs, Pryor said.

Middle East financiers and additional Wall Street investors are among those likely to be approached by Goldman Sachs about a possible investment, a studio insider said.