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MGM mulls prepackaged bankruptcy with sale: sources
NEW YORK |
NEW YORK (Reuters) - Metro-Goldwyn-Mayer, which has received several first-round bids in an auction to sell itself, is considering a prepackaged bankruptcy along with a sale, sources familiar with the matter said.
The move would offer a healthier company to a buyer of MGM -- which is struggling with $3.7 billion in debt -- by reducing liabilities and cleaning up its balance sheet, the sources said.
Many media companies, including Time Warner Inc and Lions Gate Entertainment Corp, have put in bids for MGM, along with separate offers from private equity firms, the sources said. But not all the 12 companies that signed confidentiality agreements to look at MGM's books over the past month have put in bids, they added.
The initial bids, which are non-binding, came in under $2 billion, sources said.
All the sources spoke on condition of anonymity because details of the sale process have not been made public.
News Corp, which had refused to sign the confidentiality agreement earlier due to a restrictive clause, has now signed the document but is yet to put in a bid, one of the sources said on Wednesday.
Time Warner and News Corp declined to comment. Lions Gate did not return a call seeking comment.
The non-binding bids, which means that bidders are not legally bound to follow up on their offer, are expected to help MGM assess the level of interest among potential buyers .
MGM said on Monday it had received "numerous indications of interest" and that it was evaluating the bids and having discussions with interested parties.
"MGM expects the next phase of this process to begin next week," the statement said. A spokesman declined to comment when asked about plans for a prepackaged bankruptcy.
So-called "prepackaged" bankruptcies have grown in popularity this year, as troubled companies have found it a way to cut debt and liabilities, and swiftly move through court -- often exiting bankruptcy protection in as little as 30 to 90 days from the date of the initial filing.
In a prepackaged bankruptcy, companies and their creditors agree on a reorganization plan or sale prior to the bankruptcy filing. Since creditors have already voted on the plan, it increases the chances that a company's bankruptcy process will go through with minimal disruption to the business.
TURNING AROUND, WITH OR WITHOUT SALE
The studio, which enlisted turnaround specialist Stephen Cooper last year to help it restructure, got saddled with the debt from a 2005 buyout and also has a $250 million revolving credit facility maturing in April.
MGM said in November it was exploring a potential sale. The renowned studio, which is home to more than 4,000 film titles, received a lot of initial interest from rival media companies and buyout shops, but not all of it has translated into actual offers.
Liberty Media Corp, AT&T Inc and independent studio Summit Entertainment were among the companies that signed non-disclosure agreements to look at the business.
Some of the interested private equity firms are also talking to media companies about teaming up to make joint bids for MGM in later rounds, some of the sources said. While Time Warner plans to go it alone, Lions Gate is looking to partner with a private equity firm, one source said.
If the bids come in too low, MGM's creditors could decide to keep the company and restructure it, possibly still filing for prepackaged Chapter 11 bankruptcy protection, some of the sources said.
MGM's film library includes the James Bond and Pink Panther franchises. MGM also owns a piece of the two "Hobbit" films to be produced by "Lord of the Rings" director Peter Jackson.
The studio is owned by a group including private equity firms TPG, Providence Equity Partners, DLJ Merchant Banking Partners and Quadrangle Group and media companies Sony Corp and Comcast Corp.
MGM's lenders have extended a debt forbearance until January 31, which exempts it from interest payments of an undisclosed amount as it tries to develop a long-term turnaround plan. That deadline is expected to be extended further as the auction goes on.
(Reporting by Jui Chakravorty and Anupreeta Das; additional reporting by Yinka Adegoke, Susan Zeidler, Emily Chasan and Megan Davies; editing by Tim Dobbyn and Andre Grenon)
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