MGM prepackaged bankruptcy plan OKd
After 18 months of turmoil and uncertainty, MGM has gotten a green light to start anew.
A New York federal bankruptcy judge on Thursday confirmed the “prepackaged” plan by creditors to wipe out about $5 billion in debt, clearing the way for the 86-year-old entertainment company to focus its efforts on producing and releasing movies and television shows.
With Thursday’s ruling that the plan meets the requirements of the U.S. Bankruptcy Code, no legal obstacles remain for MGM to relaunch under Spyglass Entertainment founders Gary Barber and Roger Birnbaum. Barber and Birnbaum will become co-chief executives of the studio.
MGM will not emerge from Chapter 11 until JPMorgan Chase closes a planned $500-million loan facility to fund the new MGM’s operations and productions. It is currently being syndicated by the investment bank — which is itself kicking in $75 million — and is expected to be funded by mid-December.
The studio’s restructuring process began in May 2009, when investment bank Moelis & Co. was hired to advise management on how to fix its finances as it was struggling with annual interest payments of $300 million. That August, Chief Executive Harry Sloan was replaced by Stephen Cooper, a turnaround expert known for his work at Enron Corp. and Krispy Kreme Doughnuts Inc., who brought in a team of executives from his consulting firms.
Moelis’ and Cooper’s attempts to resolve MGM’s financial woes and satisfy the studio’s 140-plus creditors took much longer than expected. An auction for the studio attracted few bidders, and none were willing to pay the $2 billion-plus that creditors were seeking.
By this spring, it was back to the drawing board: The MGM team began devising a restructuring plan that, after months of debate, was endorsed by creditors in late October.
When MGM officially emerges from bankruptcy in the coming weeks, Moelis’ and Cooper’s firms will receive multimillion-dollar bonuses for their work. Moelis & Co., which has received $1.2 million so far, will get a $9.5-million payment. Cooper’s firms, which have been collecting $375,000 a month for their services, will receive a $4-million “success fee.”
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