MgmlogosmallI’m still traveling (through Sunday). But I wanted to at least quickly update you on the MGM sale situation. First, the embattled studio is looking even more beat up this week now that MGM’s Hot Tub Time Machine is tracking just mediocre despite earmarking $45 million on domestic P&A. Ugh, another MGM loser. Anyway, as you know, final bids are due on Friday. After a lot of hemming and hawing, 5 parties have been in the mix considering 2nd-round bids for MGM which put itself up for sale last year after it couldn’t keep making payments on $3.7 billion of debt. But who’s in and who’s out?

As I’ve been saying all along, the only bid that will come in for certain is Time Warner’s and everybody that I talk to says that bid will be well below $2 billion. That’s too low to satisfy anyone among MGM’s big creditors. My understanding, too, is that John Malone’s Liberty Media will not be making a final bid (which Bloomberg reported this morning quoting sources as saying that “Liberty’s assessment of MGM’s value fell below a price company executives believed would be acceptable to the Los Angeles-based studio’s creditors”). I also hear that private equity firm Elliott Capital, which invests in producer Ryan Kavanaugh’s Relativity Media, won’t be making a compelling bid, or maybe won’t bid at all. *UPDATE: Yep, they’ve dropped out…*

Nobody knows what Lionsgate is going to do and whether it can even raise the capital to pull off this deal. Right now, Lionsgate has about $600 million in debt, and they would need to take on a lot more debt to pull off a MGM deal. And that’s not even factoring in the Carl Icahn situation. As for billionaire Len Blavatnik (aka “The Russian”, though his flack Mike Sitrick hates it when I refer to the Harvard-educated American citizen as such), word is he is probably going to make a recapitalization/restructuring offer, meaning that it won’t be an all-cash offer as requested by the investment bankers. There are already other and probably better offers like that out there.

In fact, I’ve learned that many of the large MGM creditors increasingly have initiated direct discussions with the companies behind those offers to keep the studio independent and upright, like media investment firm Qualia Capital. (“So why have a dialogue with them if big bids are supposedly coming in on Friday?” one of my experts asks rhetorically.) Qualia offered $500 million to fund operations as part of a plan that also seeks to convert some debt to equity. In return, Qualia would receive an equity stake in MGM. At one point, News Corp sent a letter to MGM with a non-binding offer of cash and debt assistance. Sony said as recently as this week it still wants some role in the James Bond movies once there’s a sale or restructuring — but may have to fight off Fox. And Warner Bros probably will go after The Hobbit franchise if its $2B bid is rejected. And god knows who else is out there, waiting with a check in hand if things go south on Friday.

Look, almost everyone believes — and has for some time – that this is going to be a busted auction at the end of the day. If so, the bet is that, among those sitting on the sidelines, Qualia Capital is first in line to conclude a restructuring deal since it brings capital as well as management expertise to the table. Right now, the situation is very fluid. Or, as one of my sources today quoted Warren Buffet as saying, “only when the tide goes out do you discover who’s been swimming naked.”

Editor-in-Chief Nikki Finke - tip her here.