MGM suitors slow to review records

Nondisclosure form could be holding up process

Due diligence by prospective suitors for MGM is going slowly.

Studio reps don't call the process an auction as there's no certainty any offer for the studio will be accepted. But with nearly 150 debtors pressing for action and a big debt payment looming on Jan. 31, it's hardly helpful that so few companies have begun reviewing MGM financial records.

The records are contained in the online "data room" set up by Lion consultant Moelis & Co., which about a month ago sent out nondisclosure forms to 16 companies. Only four companies have signed off on the documents.

The problem seems to be terms of a nondisclosure form Moelis has asked prospective MGM bidders to sign before gaining access to the data room. At least two companies rejected the documents outright and the rest of been negotiating over nondisclosure terms.

It's hardly the first time such forms triggered negotiations between buyers and sellers before nondisclosure signoffs. But there's little precedent for talks of such a sort dragging on for several weeks as with the MGM process.

As a result, some will question whether MGM chief Stephen Cooper purposefully arranged things so that failure was guaranteed. After all, the cynics will say, he had been pushing for a simple restructuring of studio debt and agreed to the solicitation of offers only when holders on almost $4 billion of Lion debt insisted.

It was unclear what terms of the nondisclosure forms have triggered the most difficulty.

Occasionally, such documents bar suitors from sharing the data with certain types of other companies. A Bloomberg report suggested Fox had cried foul over language involving a possible legal liability for participants in the process.