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Carl Icahn Makes Another Offer To Buy Up Even More MGM Debt

Carl Icahn has made another offer to MGM lenders in hopes of thwarting the prepackaged bankruptcy plan and Spyglass deal. He’s now offered to buy $1.6 billion in debt at a premium price of 53 cents on the dollar; last week, he offered to buy $963 million in debt. The offer expires Friday — the voting deadline for the bankruptcy/Spyglass plan that would put Gary Barber and Roger Birnbaum in charge. On Monday, Lionsgate sent a letter to MGM proposing that a Lionsgate-MGM merger, which Icahn now supports, could save about $100 million annually and increase revenues. If Icahn indeed manages to buy up the $1.6 billion, the total amount he would own would give him a majority of the debt. The Spyglass plan would give lenders 95% ownership of the company; a Lionsgate merger would give creditors a 55% equity stake.

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Lionsgate Says Merger With MGM Would Save $100 Million A Year

In a letter sent to MGM on Monday, Lionsgate said its proposed merger with the studio would amount to $100 million in annual savings while boosting cash flow by $120 million over five years. Documents were also filed with the SEC. Among the details of the proposed merger: The new company would lead to a reduction in staff of about 175 people, or 17% of the combined workforce of the two companies. And a merger between MGM and Lionsgate would lead to the production of 16 movies per year. MGM’s board faces a Friday deadline to vote on a proposed prepackaged bankruptcy plan in which Spyglass Entertainment’s Gary Barber and Roger Birnbaum would be put in charge. Under that scenario, creditors would own 95% of the studio’s equity. The Lionsgate proposal gives MGM creditors 55% of the equity. Last week, Carl Icahn, who supports the Lionsgate plan, offered to buy another $963 million of MGM’s debt.

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Icahn Makes Offer To Buy More MGM Debt To Expedite Merger

Calling the proposed Spyglass plan a “presciption for disaster,” Carl Icahn on Thursday offered to buy another $963 million of MGM’s debt. He already owns around $500 million of it, so the sum would make him one of MGM’s largest creditors – with a stake of around 37%. Pending the offer, he would then be in a good position to approve a merger between Lionsgate and the studio, one he now supports. Some of MGM’s creditors are pushing hard for that prepackaged bankruptcy plan that would instead see Spyglass’ Gary Barber and Roger Birnbaum come in and run the studio. As a condition of his offer, Icahn said anyone selling to him must vote against the Spyglass plan; a vote is scheduled for Oct. 29. Icahn also stated on Thursday: “This is the critical decision point for MGM lenders, yet we are being rushed into an extraordinary Prepackaged Plan with limited information and input, on a “hurry up basis” that frustrates any dissent. I hope to defeat this “rush to judgment.”

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Lionsgate, Carl Icahn Set Sights On MGM

Below is Carl Icahn’s statement from this morning expressing his support for a proposed Lionsgate/MGM merger. Late Monday, Lionsgate sent a proposal to MGM expressing support of a ”business combination” after what it called “detailed” discussions with Icahn. All of this after rebuffing Icahn’s attempts for so long. This latest development comes just days after MGM  said it was planning a merger with Spyglass wherein Gary Barber and Roger Birnbaum would be the new bosses.

“We are holders of significant positions in both Lions Gate stock and MGM debt. Today, Lions Gate has made a proposal to combine these two companies. We believe that this combination of Lions Gate and MGM would enhance value for all constituencies and we believe this proposal as submitted is far better for MGM holders than the current proposal to combine MGM with Spyglass. In addition, we also believe such a combination transaction would enhance the value of Lions Gate shares. However, we intend to continue to pursue our lawsuits regarding Lions Gate’s recent dilutive transaction with Mark Rachesky. Whether or not we prevail in those lawsuits, we intend to continue to support a combination of Lions Gate and MGM. Our support for this combination is conditioned on the combined company having satisfactory corporate governance provisions.”

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MGM Crowns Spyglass Partners Gary Barber And Roger Birnbaum New CEOs

Mike Fleming

2ND UPDATE: MGM has just confirmed Deadline’s report that it has formally named Spyglass partners Gary Barber and Roger Birnbaum its new chairmen/CEOs, and the studio has just issued a press release describing its reorganization effort. It appears below. What isn’t answered is whether MGM will be revived as an entity that strips off its distribution and marketing arms, and makes a distribution deal for product that will include the next installment of James Bond. Deadline was first to tell you on June 29 that the reorganization plan called for MGM to reemerge as a production facility. The advantage is saving money on manpower and other costs, but eventually some of that would be wiped out by having to pay a distribution fee to someone else. What is clear is that the recent MGM developments put Mary Parent one step closer to the exit, and already, rumors are making the rounds of where she will land a production deal. I called the offices of Birnbaum and Barber but was told they are prohibited from commenting at this point.

UPDATE: I’m told that MGM will shortly announce Gary Barber and Roger Birnbaum as its new co-chairmen/CEOs, effective once MGM emerges from Chapter 11. They don’t officially take office until MGM emerges from bankruptcy. This is part of the long expected restructuring plan, as MGM brass has begun to solicit votes from lenders to convert 100% of the … Read More »

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MEMO: MGM Not Veering From Spyglass

Mike Fleming

EXCLUSIVE: Despite the speculation that India conglomerate Sahara India Pariwar might swoop in and buy MGM for $2 billion, it doesn’t sound like MGM’s current management is taking it that seriously. At least not based on this internal memo I just obtained:

To All Employees:

We wanted to take this opportunity to provide you with an update on the Company’s restructuring efforts. Recently we announced that our lenders have again agreed to extend the forbearance period relating to certain of our debt obligations and we are appreciative of their ongoing support throughout this process.

We recognize that throughout this restructuring process, there has been a great deal of speculation about the Company’s future in the media and elsewhere which can be very distracting. We appreciate the focus, hard work and dedication you all have demonstrated for the last year. We can assure you we are working to bring this process to a conclusion as quickly and thoughtfully as possible. However, the process is still evolving and we appreciate your understanding that there are not a lot of definitive answers at this stage.

In the latest evolution of this process, we have entered into a nonbinding letter of intent with Spyglass Entertainment’s Gary Barber and Roger Birnbaum to become the co-chairmen and co-chief executive officers of MGM upon consummation of a restructuring. We believe this development is a constructive step toward concluding this process. The Company will be working with Messrs. Barber and Birnbaum

Read More »

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Bloomberg: MGM Creditors To Vote On Pre-Packaged Bankruptcy Plan This Month

Nellie Andreeva

MGM creditors will be asked to approve a restructuring and pre-packaged bankruptcy plan for the studio within the next week or two, Bloomberg reports. This follows Spyglass chiefs Roger Birnbaum and Gary Barber’s signing non-binding letters of intent on Wednesday to become MGM co-chairmen/CEOs. So this next step of a pre-packaged bankruptcy proceeding has been expected for months. It would convert debt to equity and remove the $4 billion debt which has crippled the studio so that it can start generating films again. According to Bloomberg, Birnbaum and Barber would receive 5% of the merged company for their film library, valued at $100M.

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Spyglass Partners Inch Closer To MGM Reins; Battle Royals Looms For James Bond Distribution Rights

Mike Fleming

As expected, the MGM ownership situation is getting closer to being sorted, and it won’t be long before the Lion has a chance to roar again. Or at least emerge from its cage. Spyglass chiefs Roger Birnbaum and Gary Barber have signed non-binding letters of intent that will make them MGM co-chairmen/CEOs. That leads to the next step, which is a pre-packaged bankruptcy proceeding that would convert debt to equity, removing the $4 billion albatross from around the Lion’s neck so that it can start generating films again. The prepackaged bankruptcy allows the company to be restructured while it freezes existing deals for franchises that include the James Bond series and The Hobbit.

The LA Times reports that the Spyglass guys are already looking past this hurdle, and are talking with Ken Schapiro about coming aboard as COO. He’s a vet of Qualia Capital, which was among the entities that kicked the tires on MGM before management decided to go with Birnbaum and Barber, who are expected to make projects but will likely eliminate the studio’s marketing and distribution arms and set the projects up elsewhere. All this means that The Hobbit, with Peter Jackson at the helm, can move forward, with co-financing partner Warner Bros distributing the two films worldwide.

The situation on 007 will be more feverish. Warner Bros, Sony Pictures Entertainment and 20th Century Fox are the obvious outlets, … Read More »

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EXCLUSIVE: Summit Walks Away From MGM To Go Back Into Acquisitions Mode

“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 … Read More »

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MGM To Morph Into A Pure Production Play?

Mike Fleming

Can ‘The Hobbit’ Wait For MGM Decisions?

MgmlogosmallEXCLUSIVE: Now that Spyglass has emerged as the favorite to steer MGM’s future fortunes — although Summit insists it’s not out of the running yet and Lionsgate is in merger talks — more details are emerging about MGM’s possible future. Insiders tell me that the Spyglass plan would transform MGM into a pure production company and close down its marketing and distribution divisions. That would certainly cut costs in the short run. 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 Spyglass partners Gary Barber and Roger Birnbaum do what they do well, which is to lower risk by making domestic and offshore distribution deals.

SpyglassBut I see the downside of this plan. MGM would have to pay others to distribute and market its films — and those fees could be comparable or higher than the monies saved on overhead. I’m told that rival Summit and Lionsgate proposals would maintain MGM as a studio because both companies have distribution divisions. The Spyglass move would mean yet another morphing of MGM over the recent past. Under Harry Sloan, the revived studio started off as a distribution rental system for films by financiers like Sidney Kimmel and The Weinstein Co, a strategy that didn’t work. Read More »

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Spyglass Beating Summit To Run MGM?

MgmlogosmallFor weeks now, we have been hearing from our various sources at studios, agencies and production companies that Spyglass Entertainment is in the lead to run a restructured MGM despite Summit Entertainment also being very much in the mix. But it’s been near-impossible to get any confirmations, so we’ve held back writing. Though we almost posted last week when we received a batch of new and detailed information.

Well, tonight, the Wall Street Journal published that and everything else we’d heard, also with no confirmations. The WSJ emphasizes that talks are continuing and no final decisions have been made. So the paper’s info is exactly where our info is: not pinned down.

SpyglassHere is where things stand: Spyglass co-heads Gary Barber and Roger Birnbaum would run the studio as co-chief executives under the current restructuring plan being discussed with a group of large MGM’s creditors. But Summit toppers also are still very much under consideration and haven’t heard they’re out of it — at least not yet. I can report that this lead group of MGM creditors consists of Anchorage Advisors, Highland Capital Management, and Davidson Kempner Capital Management who have banded together. Led by Anchorage, they bought up MGM debt on the cheap so that they now represent what I’m told is about $400 million of it. (The WSJ says it’s about 1/3 of the outstanding debt which was purchased for $.60 on … Read More »

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