Metro-Goldwyn-Mayer (MGM) proposed a pre-packaged Chapter 11 bankruptcy plan last week that could wipe out $4 billion in debt and breathe new life into the ailing movie studio.
The proposed bankruptcy plan provides an opportunity for MGM’s secured lenders to exchange more than $4 billion in outstanding debt for 95.3 percent of equity in the company upon its emergence from Chapter 11 bankruptcy. Also, if approved, the bankruptcy plan will place of founders of Spyglass Entertainment at the helm of MGM and merge two affiliates of Spyglass with MGM in exchange for 4.17 percent of the reorganized company.
The next chapter to MGM’s money making “Lord of the Rings” movie trilogy could also begin production after the bankruptcy plan is approved and implemented. “The Hobbit,” which is a two-part prequel to the blockbuster “Lord of the Rings” trilogy had been on hold because of MGM’s financial woes, but the bankruptcy plan could allow it precede to production. It is also reported that Spyglass is planning to ramp up movie production at MGM once the company’s bankruptcy plan is approved and they exit Chapter 11 bankruptcy. That’s good news for those employed in the movie industry and good news for MGM which has been financially struggling for years before they decided to file bankruptcy. By reducing its debt in bankruptcy, MGM will become even more enticing for investors who may have avoided the movie studio before due to their heavily leveraged position. With an attractive movie archive which includes such hits as the James Bond franchise along with the benefits of Chapter 11 bankruptcy, MGM could potentially outcompete other studios after emerging from Chapter 11 bankruptcy.