MGM passes audit, says it’s in ‘full compliance’ with debt requirements
Metro-Goldwyn-Mayer Inc., scrambling to refinance its $3.7-billion loan, said in a statement Wednesday that an audit showed the struggling studio to be in “full compliance with all of its debt covenants.”
The results of the audit are welcome news for MGM; nonetheless, few in Hollywood believe that the debt-ridden company can 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.
MGM pays almost $300 million a year in interest and faces a debt payment of nearly $1 billion in June 2011, with the remainder of the loan due in July 2012.
Additionally, the studio’s $250-million revolving credit facility will mature in April.
The company also said Wednesday that along with the results of the audit conducted by Ernst & Young, it delivered its March 31, 2009, financial statements to its lender group.
Two months ago Chief Executive Harry Sloan told investors that the studio’s cash flow for its fiscal year ended 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 to provide any additional financial details Wednesday. The studio has not released a film since “Valkyrie” in December. Its next movie -- and its only movie scheduled for release this year, a remake of “Fame” co-produced with Lakeshore Entertainment -- is not due in theaters until September.
The studio has announced firm release dates for only four movies next year: “The Cabin in the Woods,” a comic horror-thriller; “Hot Tub Time Machine,” a comedy starring John Cusack; “The Zookeeper,” a comedy with Kevin James; and “Red Dawn,” a remake of the 1980s action-thriller.
In 2008, Sloan hired former Universal Pictures production executive Mary Parent to help transform the studio into a producer of its own movies rather than simply a distributor of films made by others.
Since then, Parent has been buying scripts and putting together movie projects but has been hamstrung by the cloud of financial uncertainty hanging over the studio.
It’s highly unlikely that without raising additional funds MGM will have the means to realize its ambitious plans to co-finance two big-budget “Hobbit” movies with Warner Bros. and produce 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 movie version of “The Three Stooges” starring Sean Penn, Jim Carrey and Benicio Del Toro are also uncertain. Penn announced recently that he intended to take some time off from Hollywood, thrusting the film into limbo.
MGM, which employs between 400 and 500 people and is based in a Century City office tower, has been funding operations largely with cash flow from its library.
MGM also has access to a $500-million movie fund previously set up for its smaller sister studio United Artists, of which Tom Cruise is part owner.
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