MGM audit concludes struggling studio in 'full compliance' with bank covenants
Metro-Goldwyn-Mayer Inc., scrambling to refinance its $3.7-billion loan, said in a prepared statement today that an audit showed the struggling studio to be in "full compliance with all of its debt covenants."
That said, few in Hollywood believe that debt-ridden MGM, headed by Chief Executive Harry Sloan, will continue to survive much longer in its present form without being sold or merged with another media company.
In mid-May, MGM hired investment banking firm Moelis & Co. to help restructure its heavy debt, which is largely attributable to the acquisition of the studio in 2004 by the investor group that includes Sony Corp. of America and cable giant Comcast Corp., and two major private equity firms.
MGM pays almost $300 million a year in interest and faces a debt payment of nearly $1 billion in June 2011, with the remainder due in July 2012. Additionally, the studio's $250-million revolving credit facility matures in April 2010.
The company also said today that along with the audit results conducted by Ernst & Young, it delivered its March 31, 2009, financial statements to its lender group. Two months ago, Sloan sought to assure investors that the studio's cash flow for its fiscal year ending in March "was in line with its budget." In fiscal 2009, MGM's movie and TV library generated more than $500 million in cash flow, down 5% from the year before.
MGM officials declined today to provide any further financial data or comment beyond the prepared statement, which listed the studio's upcoming releases as "Fame," a co-production with Lakeshore Entertainment due in theaters Sept. 25; the comic horror-thriller "The Cabin in the Woods" (Feb. 5, 2010); "Hot Tub Time Machine," a comedy starring John Cusack (Feb. 26 ); and "The Zookeeper," with Kevin James, which is expected to start production next week and be released in Octoober 2010. The studio also hopes to begin shooting a remake of the 1980s action thriller "Red Dawn" this fall with plans to release the film in September 2010.
In 2008, Sloan hired former Universal production executive Mary Parent to help transform the studio into a producer of its own movies rather than simply a distributor-for-hire. Since then, Parent has been buying scripts and putting together movie projects.
It's highly unlikely, however, that without raising additional funds MGM will have the means to realize its more ambitious plans to co-finance two big-budget "Hobbit" movies with Warner Bros. and the 23rd installment in the James Bond franchise. The studio's earlier attempts to secure hundreds of millions of dollars in film funding failed when the credit markets collapsed last year.
Production plans for a big-screen version of "The Three Stoges," to star Sean Penn, Jim Carrey and Benicio Del Toro, are uncertain. For one thing, Penn announced a few weeks back that he intended to take some time off from Hollywood to spend with his family, thrusting the film into limbo.
MGM, which employs between 400 to 500 people and is based in a Century City high-rise, has been funding operations largely out of cash flow from its library. MGM also has some access to a $500-million movie fund previously set up for its smaller sister label United Artists, of which Tom Cruise is part owner.
-- Claudia Eller
Photo: Harry Sloan by Mel Melcon/Los Angeles Times