[Updated] MGM needs money more than fame
UPDATED: Production on "Red Dawn" remake has started.
What's more important, fame or money?
For debt-ridden MGM, the answer is money.
Today, as the struggling studio opens in theaters a remake of the 1980 movie musical "Fame" — its first release in nine months and the only one for the remainder of the year — reports surfaced that MGM is begging its lenders to waive interest payments on its $3.7-billion debt until early next year. Deadline.com reported last night that, on a conference call (that actually took place Wednesday), MGM presented creditors with the request to delay the payments until February so the studio can use the money to cover overhead and fund production.
The hours-long call got a bit contentious when a couple of creditors raised their voices and threatened to force MGM into involuntary bankruptcy, but a person involved in the matter said that was to be expected when you're dealing with more than 100 lenders. He said the purpose of the call was strictly to request interest payment relief and not to ask the lenders for more money, as other reports suggested.
Still, MGM is desperate for funds and needs to get the majority of its creditors on board for a delay in order to support ongoing operation and finance production. The person said the process of winning the necessary 51% approval vote will now begin with an outcome likely in the next couple of weeks.
Leading MGM's plea to creditors was Vice Chairman Stephen F. Cooper, a restructuring expert who was hired last month to replace Chief Executive Harry Sloan after he was ousted. Cooper had led Enron Corp. through its bankruptcy but was less successful in turning around Krispy Kreme Doughnuts.
With MGM, Cooper wants to avoid a scenario in which the company would be forced into bankruptcy by its creditors, since it would greatly devalue the asset, whose crown jewel is its 4,000-title movie library, and jeopardize such lucrative franchises as James Bond, Pink Panther and rights to "The Hobbit."
MGM has a $250-million revolving-credit facility that matures in April and faces a debt payment of nearly $1 billion in June 2011, with the remainder due in 2012.
For months, MGM has been struggling to restructure the debt that was largely accrued when an investor group led by Texas Pacific Group and Providence Equity Partners bought the studio in 2005 for nearly $5 billion. Last May, MGM hired investment banking firm Moelis & Co. to help reduce the heavy debt, which is owed to about 140 creditors. MGM has been engaged in a series of talks with a steering committee of creditors. "The debt needs to be converted into new debt and equity," said a person familiar with the ongoing restructuring talks.
MGM officials declined to discuss the situation. In a prepared statement, the company attempted to put a positive spin on the state of things but provided no additional details: "Our discussions with lenders are one step of many in a proactive and ongoing process to correct MGM's balance sheet and position the company to fulfill its business objectives. MGM's leadership is aggressively pursuing a course of action that is in the best interest of the company and its stakeholders, and that includes working with our lenders to arrive at a solution that enables MGM to achieve long-term financial success."
Amid all of the financial drama, MGM production chief Mary Parent has been desperately trying to put movies together and make the Century City studio, if not exactly a viable competitor, at least a player again. But, while the executive has succeeded in mounting several productions — including the $18-million "Fame"; the $30-million comic horror-thriller "Cabin in the Woods"; "Hot Tub," a $35-million comedy starring Jon Cusack; and the $75-million comedy "The Zookeeper," with Kevin James, which Sony Pictures is co-financing — her efforts have been greatly hampered by MGM's financial debacle and failed efforts to raise new production funding.
UPDATED: MGM has started shooting a remake of the 1980s action thriller "Red Dawn" this month.
"MGM confirms the production commitments we made when we announced our new leadership structure in August," the statement reads.
Until this weekend, MGM had not released a movie since last December's World War II drama "Valkyrie," starring Tom Cruise, and will have no other films in theaters before year's end. It is unclear whether the studio will have the financial means to co-finance two "Hobbit" movies with Warner Bros.' New Line Cinema that are planned to begin production next year unless it can get the interest payment relief it is asking for and its hands on a lot of dough. Also hanging in the balance is the fate of the 23rd installment of MGM's popular 007 Bond movie series.
— Claudia Eller
Photo: Dancers perform in a scene from "Fame." Credit: Saeed Adyani / Associated Press.