MGM Files for Chapter 11 Bankruptcy, Reaches Agreement With Carl Icahn

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MGM has filed in U.S. Bankruptcy Court in New York a financial-reorganization plan naming Spyglass Entertainment co-toppers Gary Barber and Roger Birnbaum as co-CEOs of the Century City studio.

MGM has filed in U.S. Bankruptcy Court in New York a financial-reorganization plan naming Spyglass Entertainment co-toppers Gary Barber and Roger Birnbaum as co-CEOs of the Century City studio.

The “prepackaged” Chapter 11 bankruptcy plan was approved last week by more than 100 MGM lenders, who agreed to swap almost $4 billion in debt holdings for a collective 95% stake in the Century City studio. But the final terms contained certain changes demanded by investor Carl Icahn, a big MGM debtholder. RELATED: How bankruptcy filing was held up by 11th-hour demands.

Court review of the plan is expected to take 30 days after the plan is filed. Once approved by the court, the studio restructuring will wipe out ownership positions by Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle.

Icahn will end up with a sizable stake once his $400 million-plus in Lion debt is converted to equity. Icahn had been backing a rival MGM restructuring plan involving a proposed merger of MGM and Lionsgate, in which he is also a major investor.

Though the proposal has been tabled for now, some believe Icahn still will press for the merger. For now, he has won concessions including the removal of more than a dozen Spyglass film-library titles that had been included in the restructuring under the original terms.

As a result, Spyglass will get a less than 1% equity stake in MGM rather than the near 5% stake originally stipulated. Icahn will get a seat on the MGM board, along with Barber and Birnbaum.

“For many months, we have been working with our lenders to explore the strategic options available to MGM to improve MGM’s financial position and maximize the Company’s value,” MGM chief Steve Cooper, a turnaround specialist hired in August 2009 after then CEO Harry Sloan stepped down. “By sharply reducing MGM’s debt load and providing access to new capital, the proposed plan of reorganization achieves these goals. Having received approval through our recently completed solicitation process, we are pleased that the lenders support MGM’s approach. We now look forward to quickly emerging from Chapter 11.”

In a joint statement, Barber and Birnbaum said: “MGM is emerging from one of the most challenging periods of its storied history. We are honored and inspired at the prospect of leading one of Hollywood's most iconic studios into its next generation of unforgettable filmmaking, global television production and distribution, and aggressively pursuing, developing and exploiting new digital entertainment platforms.”
-The Hollywood Reporter