MGM’s future has been in doubt for a while now, with rumours that the studio may go bankrupt due to incredibly tight cashflow and an enormous debt-load of over $4 billion. However The Hollywood Reporter is now saying that while the studio isn’t in danger of becoming insolvent, the man brought in to restructure the company is being quite forthright about what’s going to have to happen.
The studio was bought in 2005 by a consortium including Sony, Comcast and investment firms Providence and TPG, but they’ve had difficulty turning MGM’s fortunes around and have have accrued enormous debts in the process. Now new head honcho, Steve Cooper, a corporate restructuring expert, has admitted that after he’s finished his job, these investors could be left with as little as 10% of the studio, and therefore virtually nothing to show for their initial investment.
The rest of the company will be handed over to those who hold MGM’s massive amounts of debt, and they will become the majority shareholders. This process would make the studio’s debt far more manageable, taking it down to less than $1.5 billion, with creditors swapping debt for equity.
The next step would be that the creditors turned owners will probably put their stock up for sale, with potential bidders including Lionsgate, Warner and Fox, who would then take over MGM.
Apparently despite the retructuring, the day-to-day business at the studio won’t change, including co-producing The Hobbit films, as well as numerous other movies that are being made as joint projects with other studios, as well as through as separate production fund set up for the Tom Cruise headed United Artisits unit.
Despite once being the biggest studio on the planet, MGM’s future has been in doubt for much of the last 30 years, with all sorts of changes of ownership causing all sorts of problems. The latest round of restructuring just adds to a very long story of behind-the-scenes problems.