Spyglass Entertainment founders Gary Barber and Roger Birnbaum have signed a nonbinding letter of intent to take over the management of struggling Metro-Goldwyn-Mayer as co-chairmen and co-chief executives, according to people familiar with the deal.
The Spyglass executives have also been in talks with veteran Hollywood business executive Ken Schapiro to join the nearly bankrupt studio as chief operating officer once they take the reins.
Schapiro is partnered with Amir Malin in private media investment fund Qualia Capital, which this year proposed restructuring MGM with a $500-million cash infusion to keep the studio alive as a scaled-back operation.
If Schapiro joins the new MGM, Qualia could become involved in a recapitalization of the studio after its creditors convert nearly $4 billion in debt to equity as part of a prepackaged bankruptcy, people close to the situation suggested.
Schapiro, who worked with Barber at Morgan Creek Productions in the 1990s, did not return a call seeking comment.
Under Barber and Birnbaum, MGM would need a large cash infusion to fund production of new movies, including a planned James Bond sequel and two films based on "The Hobbit" to be co-financed with Warner Bros.
The Spyglass executives intend to dramatically slim down MGM from its current 450 employees and to outsource domestic distribution of its movies to another major studio. Barber and Birnbaum are talking to a number of potential distributors, including Paramount Pictures, where they have recently co-financed several movies.
The two leaders of Spyglass, a film financing and production company that has been involved in such pictures as "Seabiscuit" and "Bruce Almighty," would own between 4% and 5% of the new MGM once they take over. The remaining equity would be in the hands of the studio's current creditors and future investors.
Before Barber and Birnbaum can assume control of MGM, however, the studio's more than 100 debt owners and its board of directors must approve the deal and file the prepackaged bankruptcy.
The timeline is unclear although the clock is ticking. MGM's sixth forbearance on interest payments on its debt load expires Sept. 15, but that deadline probably would need to be extended once again to complete the Spyglass deal.
Although momentum is building for that agreement to close, independent studio Lions Gate Entertainment Corp. still has an alternative proposal on the table to merge with MGM. And Warner Bros. parent Time Warner Inc. is also in the wings with a long-standing $1.5-billion acquisition offer.
Spyglass did not return a call seeking comment.