Bankruptcy Judge Stuart M. Bernstein confirmed Metro-Goldwyn Mayer Inc.'s plan to exit bankruptcy in the hands of its creditors. The Chapter 11 bankruptcy moved relatively quickly, winning confirmation in less than 30 days after the movie studio filed a prepackaged Chapter 11 bankruptcy on November 3, 2010.
Judge Stuart M. Bernstein of U.S. Bankruptcy Court in Manhattan approved a plan that calls for creditors to forgive roughly $4 billion in debt in exchange for equity in the restructured MGM. Judge Bernstein said the plan satisfied the elements of the bankruptcy code and should be confirmed.
With the overwhelming support of the majority of its creditors, MGM plans to exit bankruptcy in only a few weeks after it finalizes its credit facility. The movie studio plans to raise about $500 million for new films and projects upon exiting bankruptcy, and will retain all its assets.
The MGM bankruptcy is an example of how effective a prepackaged bankruptcy can be if the debtor-company can get the majority of its creditors onboard with the restructuring plan. In the case of MGM, even the dissident creditor, billionaire Icahn could not derail its well thought out and executed bankruptcy strategy. With the cooperation of its other major creditors, MGM was able to satisfy Icahn's demands and still present the bankruptcy court with a viable restructuring plan that allowed it to retain most of its assets and resume its business activities in a short amount of time. If the company had not prepackaged the bankruptcy, the proceedings could have stretched on for years and grinded the company's operations to a total halt.