LOS ANGELES – Metro-Goldwyn-Mayer Studios Inc., distributor of the James Bond and Rocky movies, won court permission to take out a $500 million exit loan, paving the way for confirmation of its bankruptcy plan in 20 days.
U.S. Bankruptcy Judge Stuart Bernstein in Manhattan also approved a $4 million breakup fee on Friday. The fee will be paid to Spyglass Entertainment Group Inc. if it suffers any loss or damage from a breach of its agreement with the studio. Spyglass executives Gary Barber and Roger Birnbaum will run MGM after its bankruptcy.
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The fees on the $500 million exit loan will be kept confidential. The judge also granted MGM’s requests to manage its cash in bankruptcy and make non-material changes to its reorganization plan.
“Approval of these motions are required to keep the case on schedule for a Dec. 2 confirmation,” lawyer Jay Goffman told Bernstein.
MGM filed for bankruptcy on Nov. 3 with a prepackaged plan, after rejecting a takeover bid by Lions Gate Entertainment Corp. and billionaire Carl Icahn. The same day, Icahn announced he would support the plan, under an agreement that would let him designate one of nine directors on the reorganized company’s board.
Fee Questioned
Bernstein questioned the breakup-fee agreement, which would also give Spyglass as much as $500,000 in expenses. He asked whether it could be triggered if a better offer is made for the movie studio, or if it already had been triggered by the non-material changes to MGM’s reorganization plan that were made under an agreement with Icahn.
Goffman told Bernstein the fee hasn’t been triggered and the company doesn’t expect it to be.
“Approval of these motions will help pave the way for MGM to confirm its plan, which received overwhelming approval by its secured lenders on Oct. 29,” MGM spokeswoman Susie Arons said in an e-mailed statement.
MGM listed $2.7 billion in assets and $5.8 billion in debt, including accrued interest on loans, in its Chapter 11 filing. The plan, which already has approval from creditors, aims to shave $5 billion in debt by converting a loan through JPMorgan Chase & Co. into all of the new stock in the reorganized company.
MGM, whose 4,000-title film and television library included “The Wizard of Oz” and “Gone With the Wind,” has a co- production deal with Time Warner Inc.’s Warner Bros. on a planned movie based on J.R.R. Tolkien’s novel “The Hobbit.”
MGM was acquired in April 2005 in a $4.8 billion transaction by a group including Credit Suisse Group AG, Providence Equity Partners Inc., Sony Corp. and TPG Capital.
The case is In re Metro-Goldwyn-Mayer Studies Inc. 10- 15774, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
