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MGM might not make it... Bye-bye Bond and Hobbit?

Old 09-25-09, 11:01 AM
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MGM might not make it... Bye-bye Bond and Hobbit?

http://www.deadline.com/hollywood/ex...ssible-outcom/

I've collected several knowledgeable accounts of what happened during yesterday's multi-hour contentious MGM conference call with bondholders who were "very loud and very upset". Here's why:

The call was for the benefit of the lenders, and MGM management made the presentation along with Stephen F Cooper, that Zolfo Cooper restructure specialist. MGM made a desperate plea for money because the studio had missed its numbers and was going to be out of funds very soon. "The implication was that it's teetering on bankruptcy," one source told me. MGM said it needed $20M in short-term cash flow to cover overhead, and an additional $150 million to get through the end of year and continue funding its projects, and to start Peter Jackson's Hobbit.

Some say the call lasted 6 1/2 hours. Others said it lasted 2 1/2 hours with lenders, and then the lenders themselves had a conference call that lasted another 2 hours. After the MGM presentation, several bondholders spoke, "and they were irate", an insider tells me. True, this regularly happens on bad news calls like this. But in this case the creditors who hold MGM's term loan debt blame Harry Sloan for MGM overpromising and then missing its numbers, which was discussed during the summer and why he was removed as CEO. "They're not happy that Sloan let the company go in this direction but they understand whatís going on. Itís unfortunate, but they get it that the company is in a distressed situation, and they have to figure out an action plan moving forward," a source explains to me.

The conference call was planned to present the creditors with a request, or forebearance, to waive interest payments on MGM's $3.5 billion killer debt until February 2010. Because if MGM doesnít have to make those interest payments, then the studio can afford to use that money instead to fund the production slate. The bondholders couldnít understand why the equity holders wouldnít fork over the dough. But the equity holders arenít interested in writing a check because they understand that their equity is way under water already, and there's no upside for them. So, in essence, the equity holders have already written off their investment in MGM. But the bondholders have that $3.7 billion of nominal debt currently trading in the secondary market at about $.55Ė$.57 cents on the dollar. It's been trading in this low $.50s range for a while, so the marketplace is saying that the company is not worth more than $.56 times $3.7 billion. (And that's probably high.)

As a result, the bondholders are not in a great situation and therefore not feeling generous. On the other hand, if MGM were sold off today, most investment bankers donít think it would fetch more than $1.5 billion to $1.75 billion at auction. This would mean that bondholders would recover less than $.50 on the dollar. This would be an even worse outcome.

So the bondhholders said to MGM, in essence, that they were going to let the studio go bankrupt and collect their money since they'd be first in line to get paid. But Cooper explained that this would be the worst possible outcome for the creditors and the company. Because if MGM were forced into bankruptcy, then it would lose James Bond and the studio doesn't think it can stay alive without 007. Also, a lot of other issues would surface that would tremendously hurt MGM.

Also, if MGM goes through bankruptcy, that's a very expensive prospect (where only the lawyers get rich), and extremely disruptive (since who would do business with MGM in the interim) and wonít get the creditors what they want which is their money back. It's more than simply MGM losing Bond. The studio could lose a lot of other franchises.

I canít tell you whether the bondholders will agree to the forebearance or not. It requires a 51% approval vote. But some of the smart people I've contacted do think the creditors will eventually realize that a restructuring of MGM outside of the bankruptcy process is probably the best course right now.

So what's next? MGM now has to formally ask for forbearance, and the bondholders formally respond.
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Old 09-25-09, 11:03 AM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

Very, very interesting.
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Old 09-25-09, 11:06 AM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

So what happens to their DVD/BD catalog? Would Fox continue to distribute or would they have to stop?

Sony would likely buy Bond and Warner would take Hobbit. But damn...
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Old 09-25-09, 12:05 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

Yeah, Sony would buy Bond easily. Hrm....
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Old 09-25-09, 01:36 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

So if Sony bought Bond, who would distribute? Not like Bond hasn't lost a studio or distributor in the past.
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Old 09-25-09, 02:54 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

Would this kill Stargate Universe?
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Old 09-25-09, 03:07 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

Originally Posted by Dr. DVD View Post
So if Sony bought Bond, who would distribute? Not like Bond hasn't lost a studio or distributor in the past.
Sony?
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Old 09-25-09, 03:49 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

I don't think 'Fame' will make a profit for the studio - but we wont know til the end of the weekend.
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Old 09-25-09, 09:35 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

This has been going on for while and it's been expected that MGM will declare for bankruptcy sooner than later. They had reduced a lot of their catalog inventory and the feeling is that other studios will be bidding for their properties and assets when the bankruptcy happens. There is also a lot of questions on whether the rights of certain films. Will they go back to the producers and directors or will these films be available for the highest bidder? Films like Spinal Tap, the Hannibal Lecter series, Rocky Series, Bond, the international film catalog they own. Financial stupidity is what made them sell all those classic films like Casablanca, Wizard of Oz and Gone with the Wind to WB years ago.
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Old 09-25-09, 09:52 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

I wouldn't be surprised if WB tries to gobble MGM up again. They were really close to taking over MGM properties and then Sony entered the picture. Many in the industry, including Sony execs, considered Sony's handling of the MGM catalog as a failure and Fox eventually got the distribution deal.
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Old 09-25-09, 10:03 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

Originally Posted by dx23 View Post
Financial stupidity is what made them sell all those classic films like Casablanca, Wizard of Oz and Gone with the Wind to WB years ago.
I get your point, but 'Casablanca' was a Warner Brothers production.
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Old 09-25-09, 10:22 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

I thought MGM went under a couple years ago, right about when that distribution deal with Fox started. And haven't they been going downhill since the mid-'80's?
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Old 09-25-09, 10:32 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

Originally Posted by big e View Post
And haven't they been going downhill since the mid-'80's?
They lost money throughout the 1960s. Kirk Kerkorian bought them (for the first time) in 1969 and the studio quickly declined to the point where it stopped releasing movies. They tried to reboot the production company in the early '80s with the acquistion of United Artists, but they floundered in debt and crashed again. So basically, they've been going downhill since the decline of the studio system.
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Old 09-25-09, 10:35 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

Didn't they get a nice chunk of change when Turner bought their pre-1986 library? They were also able to acquire Orion in 1994 or so.. they couldn't have been doing that bad.
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Old 09-26-09, 03:24 AM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

It seems like every possible thing that could happen to keep the Hobbit from being made has happened so far.
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Old 09-26-09, 02:05 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

Originally Posted by Gerry P. View Post
I get your point, but 'Casablanca' was a Warner Brothers production.
I was going to say the same thing: Casablanca was produced by Warner Bros. But I remember the first Casablanca DVD I bought had the MGM logo. One of those complicated rights things, I guess.

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Old 09-26-09, 07:54 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

As far as rights for Casablanca and other pre-1950's WB films go, here is what I found out: Turner Entertainment owned the rights to Casablanca (and others) due to an acquisition deal from 1986:

Turner Entertainment Co. was established on August 4, 1986 as a subsidiary of Turner Broadcasting System to oversee its film library after Ted Turner's acquisition of MGM/UA (which is now owned by a consortium led by Sony Corporation of America).

In addition to the studio, Turner got its library, which included nearly all of MGM's films up to that time, the former Associated Artists Productions catalog (the Warner Bros.' pre-1950 releases & the Fleischer/Famous Popeye cartoons)... Turner Entertainment also distributes films from RKO Radio Pictures, certain films from Castle Rock Entertainment (1994-1996) and New Line Cinema (1994-1996), and shows from TBS, The CW4Kids, TNT, Cartoon Network, Kids' WB, and PBS (1994-2004) on home video via Turner Home Entertainment, and after 1996, Warner Home Video.
http://en.wikipedia.org/wiki/Turner_...ent#Background

Contractually, the MGM and Warner film libraries which Turner owned had been distributed by MGM/UA Home Video until their rights expired in 1999 at which point they were reassigned to Warner Home Video. This transaction also completed WB's re-acquiring of distribution rights to their pre-1950 library; it was absorbed into Warner Home Video after Time Warner bought Turner;
http://en.wikipedia.org/wiki/Turner_...ent#Home_video

Casablanca was released on laserdisc in 1991, and on VHS in 1992 - both from MGM/UA Home Entertainment (distributing for Turner Entertainment), which at the time was distributed by Warner Home Video. It was first released on DVD in 1997 by MGM, containing the trailer and a making-of featurette (Warner Home Video reissued the DVD in 2000).
http://en.wikipedia.org/wiki/Casabla...video_releases

And as to why it was released under the MGM label in 1997:

In 1997, MGM/UA began releasing its titles on DVD, just like every other major studio. Some of the films MGM released on DVD were from the Turner catalog, which they were still allowed to keep after Turner merged into Time Warner some time before because of their distribution deal.
http://en.wikipedia.org/wiki/MGM_Hom...inment#History

Last edited by DGibFen; 09-26-09 at 08:08 PM.
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Old 09-26-09, 10:25 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

2001 and poltergeist where some of those titles to.
Anyone else know of the early mgm released/WB owned dvds?
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Old 09-26-09, 11:28 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

Singin' In The Rain...

always takes me out of the film for some reason when I see the MGM logo at the intro...through all my life I literally thought it was an only WB kind of project.
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Old 09-27-09, 02:22 AM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

Well i personally lost interest in Bond after Brosnan left so i don't give a shit.
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Old 09-27-09, 06:47 AM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

Originally Posted by Solid Snake PAC View Post
Singin' In The Rain...

always takes me out of the film for some reason when I see the MGM logo at the intro...through all my life I literally thought it was an only WB kind of project.
Really? Gene Kelly, Arthur Freed... That's the definition of MGM in the '50s.
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Old 09-27-09, 06:55 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

Yeah, I didn't know that at the time though. I always saw a WB logo on the videos and DVDs so it just meant it was a WB film to me, especially growing up and knowing of it in pop culture. It's just a little weird quirk of mine. Nothing big.
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Old 09-27-09, 08:29 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

Originally Posted by FRwL View Post
Well i personally lost interest in Bond after Brosnan left so i don't give a shit.
you're missing out then. Casino Royale blows all of Brosnan's Bonds away, including Goldeneye (well maybe).
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Old 09-28-09, 03:55 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

yeah i saw both of them and didn't like either compared to even the worst of Brosnan's, let alone Goldeneye.
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Old 09-28-09, 03:58 PM
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Re: MGM might not make it... Bye-bye Bond and Hobbit?

Originally Posted by FRwL View Post
yeah i saw both of them and didn't like either compared to even the worst of Brosnan's, let alone Goldeneye.
Thanks for telling us all we need to know ...
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