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Carl Icahn launches third offer for MGM debt as Spyglass vote looms

October 27, 2010 |  4:15 pm

Carl Icahn has opened up a third line of attack on the plan by MGM's leading creditors and management to hand control of the studio over to Spyglass Entertainment instead of merging with Lions Gate.

The billionaire investor, the largest shareholder of Lions Gate, announced Wednesday that he was now buying any MGM debt offered to him for 50 cents on the dollar. That's a premium of about 10% over the debt's recent per-dollar trading price of about 45 cents.

This is the third offer that Icahn has made to buy MGM debt in the last week. He first said he would guarantee a minimum price of 45 cents on the dollar to any owner who wanted to sell in the next year, or before the studio exits an expected bankruptcy proceeding, whichever occurs first. On Tuesday, he offered 53 cents on the dollar to debtors who would sell to him by Friday -- the due date for a creditors vote on the Spyglass plan.

Both of those bids carried with them minimum amounts of debt that had to be offered to Icahn in order for him to go through with the purchases. The new 50-cents-per-dollar offer carries no conditions except that creditors vote against the Spyglass proposal. Creditors that control at least one-third of MGM's more than $4 billion in debt must vote against the plan in order for it to fail.

Icahn, who owns more than $500 million, or about 12%, of MGM debt, said he was seeking to acquire an additional $500 million worth of loans at the 50-cents-per-dollar price.

The activist investor favors a merger between MGM and Lions Gate. With his 33% stake in Lions Gate, which could rise in the future, and his growing share of the MGM debt that will be converted into equity as part of any financial restructuring or merger, Icahn is positioning himself to be the largest shareholder of a combined company.

-- Ben Fritz

Related:

Icahn increases pressure on MGM, launches new tender offer to take control of company

Lions Gate reveals merger proposal as MGM urges creditors to reject it

Icahn offers to buy MGM debt in gambit to push Lions Gate merger

MGM delays creditors' vote by a week, boosting Lions Gate merger proposal

Carl Icahn supports Lions Gate proposal to merge with MGM

Lions Gate makes another run at MGM

Spyglass proposes MGM reorganization plan, including prepackaged bankruptcy

Carl Icahn taking Lions Gate to court

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