EXCLUSIVE: MGM Filing Held Up By 11th Hour Demands

Financial-reorganization interrupted as attorneys work through some 11th hour demands by investor Carl Icahn.

MGM won't file its financial-reorganization plan in U.S. Bankruptcy Court in New York until midweek, as attorneys work through details of the plan, including some 11th hour demands by investor Carl Icahn.

The Chapter 11 bankruptcy plan -- which was "prepackaged" in consultation with more than 100 MGM creditors -- names Spyglass Entertainment co-toppers Gary Barber and Roger Birnbaum as co-CEOs of the Century City studio. Terms stipulated that lenders collectively would control more than 95% of equity in MGM, whose $4 billion in debt will be wiped away in the process.

But Icahn has asked that more than a dozen Spyglass film-library titles be removed from the transaction and the Westwood production company's stake be downsized from 4.7% to less than 1%. That demand was still being finessed on Monday, and Icahn's request for two MGM board seats has been whittled to one.

Ultimately, a bankruptcy judge will have to rule on whether any such changes to the terms of the studio restructuring require a new vote by MGM creditors. The studio on Friday said its creditors "overwhelmingly" had approved the Spyglass-led plan.

Court review is expected to take 30-60 days after the plan is filed. Once the review is completed, MGM's current owners -- including Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle -- will see their equity positions eliminated.

Icahn is one of the bigger MGM debtholders, after buying up more than $400 million in Lion debt from other creditors. Icahn backed a rival MGM reorg plan proposed by Lionsgate, which wanted to merge with the studio and give lenders a 55% stake in the resulting entity.

Icahn is one of Lionsgate's biggest shareholders, and the conversion of his MGM debt holdings will give him a sizeable stake in MGM. With his investing interests thus tied to both companies, some suggest the ever-scheming financier will continue to press for an MGM-Lionsgate merger -- even after the Spyglass-led plan wends its way through the court-review process.

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