So my sources, BusinessWeek's sources, and now TheDeal.com's sources all report that MGM is for sale despite the studio's denials. Last night, the well-known financial website (whose articles require a subscription) noted that MGM doesn't need Goldman Sachs because it already has relationships in place to, quoting from a statement it released Monday, "explore enhancements to MGM's long-term capital structure." The website cited in particular existing MGM arrangements with J.P. Morgan Chase & Co. and Royal Bank of Scotland Group plc. "Veteran film financier John Miller of J.P. Morgan, which with Credit Suisse Group committed $4.25 billion in debt financing for MGM's acquisition by a consortium in April 2005, was described by one source as the go-to guy should MGM wish 'to rework the credit facility.' RBS, meanwhile, has been trying to raise a $500 million credit line for the studio for six months."
So, asked TheDeal.com, what's left for Goldman to do? "Something it does really well, sources speculated, which is investigate M&A opportunities."
Sources told TheDeal.com that Goldman Sachs may help MGM take on additional equity partners as well as holding a sale of the company."
TheDeal.com adds more detail to what I've noted previously -- Goldman Sachs' long history with selling MGM. Kirk Kerkorian retained the investment bank in the spring of 2004 to co-run its auction of the studio with Latham & Watkins LLP. In addition, Goldman provided the fairness opinion advising MGM's public shareholders to accept the $12 per share offer that allowed it to go private and led to the studio's $5 billion sale to a consortium consisting of Sony Corp. and Comcast Corp. as strategic investors, as well as Providence Equity Partners Inc., TPG Capital, DLJ Merchant Banking Partners and Quadrangle Group LLC as financial sponsors.
The Deal.com also counted three shifts in the business model employed by MGM: monetizing its 4,000-title library, offering itself as a distribution platform to others, and attempting to return to major-studio status with a full production slate. "That no model has yet panned out explains why MGM's $3.7 billion in debt is trading around 75 cents on the dollar in an increasingly tough credit environment. "
As for MGM's denial that it's on the block, TheDeal.com notes that "MGM's financial sponsors have little risk in testing the market. Unlike their strategic partners, who have already written down their investments in the Lion, the consortium's
private equity members can defer mark-to-market revisions until they exit."
The financial site also predicted that UA's Merrill Lynch financing could disappear, too, after UA's development and production delays under the administration of Paula Wagner and Tom Cruise. "Sources also took issue with MGM's contention that 'existing financing arrangements are sufficient.' Even the much-discussed $500 million facility for the studio's United Artists Corp. division (secured last August from Merrill Lynch & Co.) may not last its anticipated production run of 15 to 18 movies over five years. Because it's really a revolving facility, one source explained, UA films
must meet certain hurdles to avoid 'defaults.' But given UA's performance with Lions for Lambs and the budget overruns already recorded for Valkyrie, a year-end release, it's conceivable the facility won't cover more than a total of four films."
- 'Valkyrie' Nazi Extras Sue Tom's UA Studio
- MGM Now Claims It's Not On The Block
- Goldman Sachs Shopping MGM -- Again
- Now Bond Plays Xmas Release Date Game
- Look What Tom Cruise Made Harry Say...
- Paula Wagner Is DOA At United Artists; But Was It Suicide or Murder By MGM?
- Another Top Executive Exits United Artists
- Hey, Harry Sloan, Show Us MGM's Money
- New Joint Premium TV Channel Venture By Viacom/Paramount/MGM/Lionsgate
- Hey, What's With MGM's Hiring Spree?
- Desperate MGM Studios Throws Hail Mary


If merging S.A.G. with Aftra is such a good idea then why hasn’t anyone described what that would look like or a plan on how to accomplish it? Would the treasuries be combined? Would the Actors have the Broadcasters support them in a strike or vice versa? What happens to S.A.G.’s Pension & Health and Aftra’s Health & Retirement? Does your S.A.G. Pension accrual rate diminish because you’re now funding Aftra’s Retirement plan also? What about Phase One where Aftra has 50% of the say in the Negotiating Room? How do we have more “leverage” if that continues? So many questions and so far no answers.
Phase One is the agreement between the two unions to bargain jointly since 1988. This year Aftra took advantage of an alleged “raiding” by S.A.G. of “The Bold &The Beautiful” to “suspend” Phase One and go it alone. Unfortunately for Aftra, Susan Flannery, the Matriarch of B&B, wrote a letter refuting Aftra’s allegation. Please go to:
http://www.deadlinehollywooddaily.com/bold-beautiful-actress-susan-flannery-wants-to-set-the-aftra-sag-record-straight/
FYI: Aftra has not only never apologized to S.A.G. for the accusation but never referred to Flannery’s letter.
Because of multiple failed Merger referendums Aftra decided that in order to survive they would kick into panic mode and secure as much jurisdiction as possible even if it was at the expense of the middle class actor. Because of Aftra’s shameless behavior actors are now enjoying a $509 minimum with free exhibition windows (No residuals) on Comedy Central as opposed to S.A.G.’s scale rate of $759 minimum for any cable show with residuals starting from the first re-run. Aftra is not only offering cut rate contracts to sign hour scripted dramas that have been traditionally S.A.G.’s jurisdiction (Damages. Rescue Me. etc) but has actually started an Indie outreach for feature films in New York. The current Aftra Exhibit A Theatrical Contract that was voted up by a majority of Broadcasters and DJ’s recently, per Aftra’s aggressive campaign for them to do so, has no residuals for product in Made For New Media (The Internet and beyond…). It’s been made crystal clear to the S.A.G. Negotiating Committee by Management that they intend to experiment with “non-union” talent for most if not all the Made For New Media product they intend to produce in the future. The grand punchline to all this is… It’s okay with Aftra. They’re calling it a “groundbreaking” deal.
So, at this point you’re probably thinking, “What’s the problem? We’ll just merge with Aftra then S.A.G. can control the contracts and P&H.” In a perfect world, yes. But, Phase One is clear that each Union has 50% of the vote in Negotiations even though Aftra only has 5% of Prime Time and 0% of Feature Films. Obviously Aftra has gotten really used to that arrangement and has become religious about it even to the point of rebuffing S.A.G.’s suggestion to have proportional representation in Negotiations so that the Union with the most at stake theatrically can guide the bargaining.
Aftra has never demonstrated a willingness to fight for any meaningful gains whatsoever. We believe, for instance, that the reason the DVD residual formula hasn’t changed in 27 years is that with Aftra’s 50% vote, along with a few go along get along NY S.A.G. Negotiating Committee Members making up the majority, the DVD proposal is taken off the table the second Aftra senses any resistance from Management. Aftra’s Leadership has proven over and over again that they are not Unionists. It’s all about the institution rather than the members. It’s a myopic Federation of bureaucrats who’s sole purpose is to maintain its offices and six figure executive salaries… The Aftra acting category be damned.
Since it’s impossible to combine two opposite philosophies then combining S.A.G. with Aftra will never happen.
Jeff Austin
Screen Actors Guild Member
I think there’s a certain amount of schizophrenia in the mind of the consortium that owns MGM/UA. Part of them wants MGM to work, not only for the profit potential, but also because healthy competition creates a healthy industry, but another part of them can’t really stand having a real potential competitor on the loose.
MGM has a lot of history behind it, but that history is weighing it down in just about everything but their DVD library.
Something that might attract capital investment would be a new business plan where equity investors get paid first, ahead of the “stars.” It’s so crazy, it just might work.
There’s Paramount people heading to MGM and Paramount people also heading to Lionsgate, and both companies perpetually rumored to be for sale or in merger discussions. I think that’s the marriage that will most likely happen.
There’s Paramount people heading to MGM and Paramount people also heading to Lionsgate, and both companies perpetually rumored to be for sale or in merger discussions. I think that’s the marriage that will most likely happen.
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Oh please no. MGM has been shredding other people’s money for years and years but I still hope that Lionsgate can remain ‘independent’ and not get swallowed by one of the majors. Especially Viacom.
But, in saying that, you have to admire Brad Gray’s ethos as a studio head. He knows that he isn’t able to make hit films himself so he simply gets out the cheque book and buys other smaller studio units that can. When they are hits. He takes the credit. When they are failures. He blames the unit that made them.
Genius.
Five years ago at Script Expo, several speakers talked about the demise of the film industry. Back then a producer told us. How you could have the talent the script, and the facilities, the money and the major studios would not allow you to make a film.
Film has always started, well with a script. Recently I purchased a history of director George Stevens films. He loved film. It was a journey. I believe that, for the past nine years I wrote nine scripts none read or sold. No buyers, well, because like GM, Ford, and Chrysler the studios are not open to new ideas. They have a factory system started by mega guys from another century. They don’t take unsolicited ideas ( hydrogen cars, electric cars, solar cars) They prefer a formula based on stars adopted by Thalberg to draw a crowd. The public will hopefully love an advertisement read on their local TV station on a edited video with movie “stars.” That’s why the summer was profitable even though the audience numbers are still in decline.
Sale MGM, keep MGM, umh. Numbers don’t lie. As it said in the Business week article DVD sales are declining. Jay Epstein wrote an interesting article on that a few years ago. http://www.slate.com/id/2122000/
Ticket prices in MI 4.75 for a major release. 9 at night and that’s on the weekend. While its still cheap entertainment, with expanding critics ( the thousands on rotten tomatoes most folks wont pay for a stinker. When will the majors realize its time to revamp. How about shorts? How about a new life thought, open the doors, expand the product line, think outside the box and not use the 200 writers, twenty major actors and well of course the same locations over and over again.
Dr. Zhivago was expensive to make but plays well forty years later. People still watch Cleopatra, Platoon and the Matrix. These movies started with a story; love, life, power and destiny.
To take a quote from the guys from Return to Forever. This aint no boy band and we play what we want to. Maybe if MGM opens its doors, tries new ideas, focuses on film and profit, not profit and loss. Perhaps, the studio would be revamped and not another electronic blip on Wall Street owned by Murdoch and Fox.
@ Furious D
The “stars” are of minor concern to the equity. It’s generating enough revenue from the slate to pay back the large tranches of senior and mezzanine debt that keep them up at night. Until that happens, equity won’t see a cent.
Goldwyn started his company with 15k and risked it all on a film in AZ per this Goldwyn book I’m reading.
Tonight on the local PBS station they showed That’s Entertainment hosted by the late great Frank Sinatra. Work hard, and they knew what they were doing said Frank.
Maybe that’s the ticket, have a musical starring Madonna, Lolo and maybe Chaka Khan, something set in the seventies or present day. Madonna can dance. Musicals yeah baby, that’s worth spending five billion dollars on and while we are at it throw in Michael and Janet J. A sure hit and something to make the kids go ooooooh.