NEW YORK Metro-Goldwyn-Mayer Studios Inc entered the final act of its reorganization when it won court approval, clearing the way for the storied Hollywood studio to emerge from bankruptcy with new owners.
U.S. Bankruptcy Judge Stuart Bernstein approved the restructuring plan at a hearing on Thursday in Manhattan. Jay Goffman, a lawyer for MGM, said the company expects to emerge from bankruptcy in a few weeks.
Founded in 1924 and known for its roaring lion logo, MGM produced, released or controls many of Hollywood's best known films, including the James Bond, Pink Panther and "Rocky" film series, as well as "Ben-Hur" and "The Wizard of Oz."
It filed for a prepackaged bankruptcy on November 3 after agreeing with creditors -- including billionaire Carl Icahn -- on a restructuring in which it will shed about $5 billion in debt and hand control to its secured lenders.
MGM has struggled with its debt load since 2005 when it was sold in a $2.85 billion leveraged buyout to a group of private equity firms.
The company will hand over its management to Hollywood insiders Gary Barber and Roger Birnbaum who run Spyglass Entertainment, the company behind "Bruce Almighty" and "Get Him to the Greek." That arrangement has been seen as key to a lucrative deal for MGM to participate in making two movies based on J.R.R. Tolkien's novel "The Hobbit."
Creditors, including Icahn, agreed on the prepackaged bankruptcy before the company filed, enabling it to receive judicial approval less than a month after filing for bankruptcy.
Icahn had initially fought MGM's bankruptcy plan, arguing that he wanted to merge the company instead with Lions Gate Entertainment Corp, in which he also owns a stake. Lions Gate and MGM may still pursue a merger once the studio emerges from bankruptcy, a source close to the situation said.
MORE LIONS GATE DRAMA AHEAD
Matthew Thompson, partner in Stroock & Stroock & Lavan LLP, a law firm with a big entertainment practice, said that cutting a deal with Icahn ahead of the bankruptcy filing ensured the court process was smooth sailing, but he expects more drama to unfold after the company emerges from bankruptcy.
"Someone just hit the pause button," he said referring to Icahn's large positions in both Lions Gate and MGM. "He's got a hefty stake in both companies and he can be a very vocal shareholder."
While the company's time in court was short, it followed long debt negotiations during which it had worked out most of the details of the plan in which lenders including Credit Suisse Croup AG and JPMorgan Chase & Co would swap debt for equity in a new company.
Getting through the court process in 29 days is about as short a time as possible these days, according to one professor. That quick time in court can remove the stigma that bankruptcy often carries, he said.
"You can move on with your life without the court looking over your shoulder and return to life as business as usual," said Stephen Lubben, a professor at Seton Hall University School of Law in Newark, New Jersey.
The case is In re: Metro-Goldwyn-Mayer Studios Inc, U.S. Bankruptcy Court, Southern District of New York, No. 10-15774.
(Reporting by Caroline Humer and Sue Zeidler in New York; writing by Jonathan Stempel and Andre Grenon; Editing by Phil Berlowitz)