Bankruptcy Court approves MGM's Chapter 11 plan; MGM stakeholder Carl Icahn extends his tender offer for Lions Gate
A U.S. Bankruptcy Court in New York approved Metro-Goldwyn-Mayer Inc.'s Chapter 11 reorganization filing Friday, including authorizing last-minute modifications made last week to the prepackaged plan.
Last week, financially crippled MGM filed for bankrupty after its leading creditors struck a deal with corporate raider Carl Icahn. In recent months, Icahn has become a significant debt holder in the studio and has been aggressively pushing for a merger with Lions Gate Entertainment, where he is the largest shareholder.
Among the items authorized was that MGM could seek a $500-million loan to cover its operations and production commitments once it emerges from bankruptcy, which is expected next month. The court has set a confirmation hearing on the bankruptcy plan for Dec. 2, but it could be days or even weeks following that date that MGM would actually emerge from bankruptcy.
Although MGM secured lenders overwhelmingly approved a prepackaged bankruptcy plan in late October, whereby they will swap more than $4 billion in debt for equity in a reorganized studio headed by the chief executives of Spyglass Entertainment, Icahn only agreed to support that agenda after winning certain concessions. Those concessions include striking 15 titles from the Spyglass library that were to be merged into MGM, thus lowering Spyglass' stake in the studio to under 1% from 5%; the right to appoint one person to MGM's nine-person board; and a promise to negotiate in good faith with Lions Gate about a potential merger.
This week, Lions Gate's top executives were in New York continuing merger talks with MGM creditors and, according to two people familiar with the matter, presented a sweetened proposal to the original one that would give creditors 55% of the combined company.
Meanwhile, Icahn -- who owns 33.5% of Lions Gate and has been trying to seize control of the company for more than 18 months -- announced this morning that he is extending his $7.50-per-share tender offer for the Santa Monica-based film and television studio until Nov. 22. Though Icahn appears to be acting in concert with Lions Gate managment on the MGM merger proposal, he still plans to launch a proxy contest and will shortly nominate his own slate of directors.
Lions Gate, which has set a Dec. 14 date for its annual shareholders meeting in Los Angeles, is also expected to announce its own board slate in the coming weeks.
-- Claudia Eller