MGM gets yet another debt payment extension

Metro-Goldwyn-Mayer Inc.'s lenders agreed to give the struggling studio another forbearance by allowing the company to extend its interest payments until Jan. 31. This is an extension of a deal that MGM cut with its lenders last month that let it forgo such payments on its $3.7-billion debt until Dec. 15.

In a statement, MGM said its lenders gave the extension to support the company's efforts to "develop and evaluate long-term strategic alternatives." The studio said that included "operating as a stand-alone entity, forming strategic partnerships and evaluating a potential sale of the company."

Everyone in Hollywood is betting on the latter and that MGM will officially go on the auction block shortly. And there won't be a shortage of bidders, including Time Warner Inc., News Corp. and Lions Gate Entertainment.

UPDATE (4:49 PM): MGM's invesment bankers, Century City-based Moelis & Co., is overseeing the sales process. After signing non-disclosure agreements, interested buyers will be distributed financial information information about the studio. Happy reading. 

-- Claudia Eller

[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.

Harry Sloan out as CEO at MGM

Metro-Goldwyn-Mayer Inc. Chief Executive Officer Harry Sloan has been pushed out of his job at the struggling movie studio.

Although Sloan will stay on as a non-executive chairman and remain on the studio's board of directors, the company has created an office of the CEO with three senior executives in charge of the studio's operations.

The big three are Mary Parent, the head of MGM's worldwide motion picture group;  Bedi Singh, MGM's chief financial officer; and Stephen Cooper, who has been named vice chairman and whose experience is in capital restructuring.

MGM is scrambling to deal with its heavy debt load of $3.7-billion dollars and has not had a movie in release since last Christmas. Its next scheduled release is a remake of "Fame," which is to debut on Sept. 25.

A media entrepreneur, Sloan was recruited in 2005 to turn the beleaguered studio around by MGM's consortium of investors, which includes Sony Corp. of America, Comcast Corp., Providence Equity Partners and Texas Pacific Group.

-- Claudia Eller

Update (10:49 PM): For more on Sloan's ouster and the future of MGM, see the story in tomorrow's Times.

Photo: Harry Sloan. Credit: Mel Melcon / Los Angeles Times

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