In its glory years, Metro-Goldwyn-Mayer was a Hollywood hit factory that churned out golden classics such as Mutiny on the Bounty and The Wizard of Oz. However, the US entertainment empire is to declare itself bankrupt last week under a pre-arranged deal with creditors to shed a crippling debt burden of more than US$4 billion.
After a year of wrangling over the troubled studio’s future, lenders to MGM are set to seize as much as 95 percent of the company, under a financial restructuring to be put before a bankruptcy judge in Los Angeles for approval.
Once in control, creditors intend to install the founders of a far smaller production company, Spyglass Entertainment, to run a slimmed-down version of MGM in the hope of reviving its fortunes. Spyglass bosses Gary Barber and Roger Birnbaum are responsible for hits such as The Sixth Sense.
Insolvency amounts to a humiliating comedown for a studio with a back catalogue of 4,000 titles holding 205 Oscars between them. Financial paralysis has seen movie production grind to a halt: MGM’s only significant release this year was Hot Tub Time Machine that bombed at the box office.
Industry watchers say the tentative deal to put the company through a swift bankruptcy could pave the way for filming to restart. That bodes well for James Bond fans: work on a 23rd movie about the spy has been frozen while MGM, which owns the franchise, sorts out its problems.
The Bond series was one of MGM’s most valuable assets. Daniel Craig, star of the Bond films, has made no secret of his impatience to make a follow-up to 2008’s Quantum of Solace; he said recently that he was “champing at the bit” to get going.
MGM has changed hands frequently in recent decades. Its owners have included drinks magnate Edgar Bronfman, casino billionaire Kirk Kerkorian and CNN’s founder Ted Turner. Critics say it has been milked as a cash cow and starved of long-term strategic thinking.
The studio has been laden with debt since a 2005 buyout by a consortium including Sony, Comcast and private equity firms Providence and TPG, and was due to make a US$450 million repayment on Friday.
Its lenders include major banks such as JP Morgan Chase and Credit Suisse, plus corporate raider, Carl Icahn, who specializes in making money out of distressed companies and who has been agitating, unsuccessfully, for a merger with MGM’s rival, Lionsgate.