Marking an end to a torturous yearlong reorganization process, Metro-Goldwyn-Mayer announced Thursday a plan that would see more than $4 billion in debt wiped out and the chief executives of film production company Spyglass Entertainment take over management.
The plan, which still has to be approved by nearly 100 creditors, calls for the faded Hollywood studio to be shrunk into a production company releasing about half a dozen pictures annually and run by Spyglass co-chiefs Gary Barber and Roger Birnbaum. The reorganized MGM would be valued at $1.9 billion, according to a person close to the situation, about $3 billion less than the price paid when it was bought in 2004, reflecting the declining value of movie libraries as DVD sales have collapsed.
MGM's creditors have until Oct. 22 to vote on the plan, which would see their debt swapped for 95% of the studio's equity after a pre-packaged Chapter 11 bankruptcy. People familiar with the matter expect the plan, which is already supported by the company's largest creditors, to be approved.
A bankruptcy filing would be made immediately after a vote, and the court process is expected to last about 30 days.
Barber and Birnbaum are expected to lay off much of MGM's staff of more than 400, including motion picture group Chairman Mary Parent and other executives. The new CEOs would also need to secure hundreds of millions of dollars in financing to make and market movies and a partner studio to handle distribution of movies. Among the reorganized company's first movies would be a new James Bond picture and two films based on "The Hobbit" co-financed with Warner Bros.
Spyglass and two subsidiaries would merge into MGM and together control nearly 5% of the company. As part of the deal, they would contribute 15 of Spyglass' pictures — including "Seabiscuit," "The Sixth Sense" and "Bruce Almighty" — to MGM's existing library of about 4,000 titles.
The beginning of the solicitation of lenders' votes Thursday means that MGM is no longer on the auction block. Companies that previously made acquisition or merger offers, including Time Warner and Lions Gate Entertainment, cannot make another bid unless the Spyglass plan is rejected by the debt holders.