It looks like the Lion might get put down!!! Deadline's Nikki Finke reported the very disturbing details.
After between 2-1/2 to 6-1/2 hours of conference calls between restructure specialist Stephen F Cooper, MGM Studios Management, and their "very loud and very upset" bondholders, it's very clear MGM is on the brink of bankruptcy!
MGM said it needed:
$20M in short-term cash flow to cover overhead, and an additional $150 million to get through the end of year and continue funding its projects, and to start Peter Jackson's Hobbit.
But the bondholders have that $3.7 billion of nominal debt currently trading in the secondary market. But it's been trading so low, that if MGM did go bankrupt, the company is not worth more than $.56 times $3.7 billion.
Most investment bankers don’t think it would fetch more than $1.5 billion to $1.75 billion at auction. This would mean that bondholders would recover less than $.50 on the dollar. This would be an even worse outcome.
As a result, the bondholders wanted to let the studio go bankrupt and collect their money since they'd be first in line to get paid.
But Cooper explained:
This would be the worst possible outcome for the creditors and the company. Because if MGM were forced into bankruptcy, then it would lose James Bond and the studio doesn't think it can stay alive without 007. Also, a lot of other issues would surface that would tremendously hurt MGM.
What the studio was hoping to to accomplish with the conference call, was to present the creditors with a request, to waive interest payments on MGM's $3.5 billion killer debt until February 2010.
Because if MGM doesn’t have to make those interest payments, then the studio can afford to use that money instead to fund the production slate.
But the equity holders wouldn’t pay up, because they have already written off their investment in MGM, leaving MGM Studios and their bondholders in the current situation they're in.
If the MGM does indeed go bankrupt, The Hobbit and James Bond properties would quickly get snatched up by other studios. I can't imagine production on those massive franchises being slowed down. MGM would be the only ones losing their asses on those, if they had to sell the distribution rights. But as for MGM's other franchises-- Robocop and many others-- they may be left in peril.
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