“Summit is pulling out because the process has gone on way too long and it’s become a distraction for the business,” an insider tells me this morning. Summit toppers Rob Friedman and Patrick Wachsberger are still in acquisition mode, and the company will continuing looking for good deals in what is a very depressed showbiz marketplace where bargains are plentiful — especially film and TV libraries. The fundamental issue which MGM creditors had with Summit is that they would have had to give up too much equity in order involve the mini-major which remains flush with cash thanks to the Twilight franchise. “I’m not sure that Summit bowing out changes the Spyglass situation,” my insider added. For months now, Hollywood has known that Spyglass is the bigger creditors’ frontrunner to control MGM, which seems finally poised to plunge itself into a prepackaged bankruptcy, and then emerge with Spyglass partners Roger Birnbaum and Gary Barber starting production for the studio. But Summit has remained very much under consideration and hadn’t heard they’re out of it — at least not yet. So Summit decided to pull the plug on its own.

This lead group of MGM creditors (Anchorage Advisors, Highland Capital Management, and Davidson Kempner Capital Management who have banded together) would have Spyglass plan transform MGM into a pure production company and close down its marketing and distribution divisions. Coupled with the equity that Spyglass would bring to the table, a streamlined MGM would lower its debt and have a shot at raising new funding to finance its own pictures. That would let Barber and Birnbaum lower risk by making domestic and offshore distribution deals. It’s a long way from what the studio’s beleaguered backers originally envisioned: an outright sale. but that auction produced lowball bids. So the studio has languished, not making new movies and benching MGM’s creative and marketing/distribution execs. However, MGM has made sure to meet the minimum obligations to its two high-profile and sure thing profitable franchises, James Bond and The Hobbit movies.

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