Spyglass plan for MGM would slash costs, outsource distribution
Spyglass Entertainment would substantially reduce Metro-Goldwyn-Mayer's approximately $150 million in annual overhead costs by slashing staff and outsourcing theatrical distribution to one of Hollywood's six major studios as part of a proposal to take over the debt-burdened company, two people close to the situation said.
The downsized MGM, which under the plan would likely relocate from its costly leased headquarters in Century City, would produce a handful of films each year, including James Bond adventures and two planned movies based on "Lord of the Rings" author J.R.R. Tolkien's "The Hobbit" that would be co-financed by fellow rights holder Warner Bros. The reconstituted studio would be run by Spyglass co-chief executives and founders Gary Barber and Roger Birnbaum, who are expected to receive a small equity stake in MGM while the majority would be owned by bond holders who would swap their debt for equity, these people said.
Spyglass, the production and financing company which helped bankroll last year's hit "Star Trek" and the January flop "Leap Year," is one of two current contenders to assume management of MGM, along with "Twilight" distributor Summit Entertainment.
Under its proposal, Summit would merge MGM into its operation and distribute its movies, according to a person familiar with the matter.
Neither Spyglass nor Summit has received official word from MGM's leading debt holders, who are currently deciding the studio's future, about which is the preferred candidate to take over, said two people close to the situation. The Wall Street Journal reported Monday night that Spyglass "has emerged as the leading contender."
Both Spyglass and Summit recently made presentations to top MGM creditors, including Anchorage Advisors, Highland Capital Management, and Davidson Kempner Capital Management, explaining their visions for keeping MGM a going concern.
Any agreement between Spyglass or Summit and MGM's largest creditors would need to be approved by all of the studio's debt holders.
Proposals by current MGM management, including motion picture group chairwoman Mary Parent to recapitalize the studio, as well as a $1.5-billion acquisition offer by Time Warner Inc., have not been formally rejected by creditors but are considered longshots by people close to the company.
A fifth forbearance of MGM's interest payments on its nearly $4-billion debt load granted last month by creditors is set to expire July 14.
An MGM spokeswoman declined to comment.
-- Claudia Eller and Ben Fritz
Photo: Roger Birnbaum, left, and Gary Barber in 2000. Credit: Los Angeles Times.